Methods of public debt management

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2020-07-03 03:23:09

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Issues relating to public debt management are among the main economic policy of Russia. And this is due to the fact that in recent years there has been a  increase in public debt and expenses to repay him. Hence, the main goal of management: reduce debt and reduce expenses for repayment. That's just not so simple as it might seem at first glance. The management of domestic public debt, as well as external, has characteristics that are associated with the nature of the relationship with lenders, debt settlement, for the ongoing maintenance and restriction in the choice of ways of debt settlement. In this regard, it is worth to get acquainted with what are the methods of public debt management.

Methods of public debt management

·         Refinance – repay principal amounts (or all), as well as interest from those funds that were received from the issuance of new loans.

·         Revocation (default) – the refusal of the state from the payment of the debt and its interest.  on previously issued loans.

·         Conversion – a decision by the state about the change in the yield of previously issued loans. To achieve this, the government typically reduces the size of interest payments.

·         Innovation – the agreement between the borrower and the lender on the termination of the commitments and their replacement with other obligations that provide for other terms of debt repayment.

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·         Unification – a decision by the state about the Union of several previously issued loans, when there is an exchange of bonds previously issued loans bonds new loans.

·         Consolidation – increase of validity of previously issued obligations. The state is always interested in how to get loans for longer periods.

·         Deferred repayment of the loan (or all loans issued in advance) – held in the case, when the further issue of new loans is not responsible for the state financial activity.

Such techniques of debt management like the conversion, harmonization and consolidation of state hires most often be performed in relation to internal loans. As for the deferral of repayment of the loan, then this measure can be applied for foreign loans.

Principles of management of public debt

The Methods of public debt management was created in order to solve the following tasks:

·         to Keep the levels of domestic and external public debt at the same level. This is necessary in order to preserve the economic security of the country and to ensure that bodies of those obligations they have undertaken, should not be considerable damage to the financing of socio-economic development.

·         to Minimize the cost of debt due to the lengthening of the debt term and the reduction of income government securities.

·         Save the state a reputation as a good borrower due to the uninterrupted performance of all obligations to investors.

·         to Maintain the stability and predictability of the public debt.

·         to Achieve the most effective and efficient use of the borrowed funds.

·         Coordinate the actions of bodies of the RF subjects, local governments and Federal agencies in the debt market of the country.

·         Diversify debt on the borrowing terms, forms of payment and other parameters with the aim to meet the needs of investors.

Basic problems of debt management

·         currently still not fully solved the problem of the debt. This applies in particular to obligations of the Russian Federation in accordance with its guarantees.

·         Requires improvement of normative regulation of the state debt.

·         there is no legislated rules for determining the amount of state external debt, consistent with international standards.

 

 


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Alin Trodden - author of the article, editor
"Hi, I'm Alin Trodden. I write texts, read books, and look for impressions. And I'm not bad at telling you about it. I am always happy to participate in interesting projects."

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