The concept of the essence and main elements of public debt. The economic essence of public debt. Domestic public debt. A debt is considered bad if
1. Public debt - basic concepts
1.1 Concept of public debt
An excess of public debt over GDP by more than 2.5 times is considered dangerous for the stability of the national economy, primarily for stable monetary circulation.
National debt- this is the amount of state debt for not yet repaid internal and external loans. This includes the debt itself plus any interest accrued on it.
Government debt is the amount owed on issued and outstanding government loans (including accrued interest). It should be noted that the concept of public debt is given differently by different theorists. Ultimately, in order to fully understand the concept of public debt in relation to a specific country, one should look, first of all, for the official interpretation of this concept in various regulatory legal acts.
Moreover, in any definition there are always central executive authorities. The public debt is determined by the amount of the federal budget deficit that has developed by a given date minus the positive balance (surplus) of this budget. In addition, Russia’s debt obligations to:
§ individuals and legal entities
§ foreign countries
§ international organizations and other subjects of international law, including obligations under state guarantees provided by the Russian Federation.
Public debt is divided into:
§ External public debt- this is a component of government debt for external loans and other debt obligations to non-resident creditors. The presence of external debt in a country is a normal world practice. However, there are limits beyond which an increase in public external debt becomes dangerous.
§ Domestic public debt- this is a component of government debt for domestic loans and other debt obligations to resident creditors. The presence of domestic debt is not the exception in the economy, but rather the rule. Economically developed countries tend to have significant public domestic debt. However, there is a significant difference in the reasons, methods of formation and features of the functioning of this type of debt.
When talking about public debt, the following terminology is used:
§ Capital debt- this is the sum of debt obligations issued and outstanding by the state and the obligations of other persons guaranteed by it, including accrued interest on these obligations.
§ Principal debt- this is the nominal value of all debt obligations of the state and borrowings guaranteed by it.
In accordance with the Budget Code, the volume of Russia's domestic public debt includes the principal debt, that is, the nominal amounts of debt on government securities of the Russian Federation, on credits, advances and credits received from budgets of other levels, on government guarantees provided by Russia. Similarly, external debt includes obligations under government guarantees provided by the Russian Federation and the amount of principal debt on loans from foreign governments, credit institutions, firms and international financial organizations. If there is a delay in the payment of interest on the principal amount of the government debt, then the government debt does not increase by the amount of unpaid interest.
1.2 Causes of public debt
Public debt is caused by the use of government loans as a form of attracting monetary resources to expand reproduction and meet social needs. The reason for the emergence and growth of public debt is the constant deficit of the state budget. At the same time, the presence of public debt is not an exception in the economy, rather the rule: economically developed countries have significant domestic debt. However, there is a significant difference in the causes, methods of formation and features of the functioning of this type of debt depending on the country.
In developed countries, public debt and the budget deficits that cause it are factors built into the economic cycle for stabilizing the economy and its development. Loans taken from the population, corporations, banks, other financial and credit institutions are used productively and are considered as assets of the listed borrowers. National debt is viewed as a “loan of the nation to itself” and does not affect the overall size of the nation's total wealth.
In connection with the above, it is impossible to say unequivocally that the emergence of public debt is associated exclusively with the deterioration of the economic situation in the country; moreover, by competently managing the opportunity to attract borrowed funds (and, as a result, increasing public debt), it is possible not only to improve the economic situation in the country and solve acute social problems problems, but also simply use it as a source of financing in accordance with the principles of competent financial management with great benefit for your country.
1.3 Forms of public debt
§ Credit agreements and agreements concluded on behalf of the Russian Federation as a borrower with credit institutions, foreign states and international financial organizations;
§ Government loans made by issuing securities on behalf of the Russian Federation;
§ Treaties and agreements for the Russian Federation to receive budget loans and budget credits from budgets of other levels of the Russian budget system;
§ Agreement on the provision of state guarantees to the Russian Federation;
§ Agreements and agreements, including international ones, concluded on behalf of the Russian Federation, on the prolongation and restructuring of Russia’s debt obligations of past years.
Servicing public debt is associated with the redistribution of income in the country. To pay off the debt, you can use the assets available to the state by privatizing state property. Another approach is associated with increasing budget revenues by expanding the tax base. The burden of maintenance is shifted to taxpayers. Another source of debt repayment could be loans from the Central Bank.
However, in the context of the country's main bank being independent from the government, it is very difficult to use emissions to reduce debt. Servicing external debt actually means the legal export of capital, which is reflected as a separate line in the balance of payments, that is, it leads to the redistribution of part of the national income through the fiscal and monetary system in the interests of non-residents.
Financing the budget deficit from domestic sources also does not always contribute to the development of the national economy. An increase in domestic debt means an increase in the share of government borrowing in the financial market. This could lead to competition for resources in the domestic financial market, rising interest rates and reducing capitalization of the private securities market. In addition, investments are reduced, since investment projects with a profitability that does not exceed the interest paid on government securities along with the risk premium will remain unrealized.
Public debt is associated with the redistribution of GNP and part of the national wealth to form additional state resources by borrowing money from individuals and institutions, as well as through loans from foreign countries. Structurally, public debt includes:
§ financial debt- monetary obligations of the state in connection with the loan of credit funds
§ administrative debt- payment debts (for example, wage arrears).
Sometimes government debt may also include debt obligations of the state with guarantees (for example, financial guarantees to facilitate export-import activities).
The origin of credit funds allows us to consider them as internal and external debt of the state. The state's creditors are:
§ banking system
§ non-banking sector (for example, social insurance system)
§ foreign public and private organizations.
Public debt comes in two main forms:
§ Government securitiesliquid, anonymous, can be freely traded on the secondary market
§ Debts recorded in accounting records, cannot be assigned or sold. As a rule, a small part of the public debt is formalized in this form.
1.4 Types of public debt
The Law of the Russian Federation “On the State Internal Debt of the Russian Federation,” adopted in 1992, established the division of public debt into internal and external, carried out according to the currency criterion. Thus, at present, borrowings are divided into internal and external in accordance with the currency of the obligations arising, ruble debts refer to domestic debt, and foreign currency debts refer to external debt.
The legally established tautological definitions “domestic debt = ruble debt” and “external debt = foreign currency debt” are firmly rooted in government finance statistics. The division, which is meaningless in itself, is justified only by the existing differences in the mechanisms of regulation and control over ruble and foreign currency borrowings.
“domestic debt = ruble debt”
“external debt = foreign currency debt”
It may seem that the problem of dividing public debt into internal and external is scholastic and far from reality. However, in the course of analyzing the situation in this area, one has to face very great difficulties in processing data, since there is no uniform methodology for all types of borrowing. Accounting for government debt obligations is carried out depending on the history of their origin, creditor, form and a dozen more often random factors. Moreover, the key (ideological) is the currency of the obligation.
There are also real oddities, for example, obligations on domestic foreign currency loan bonds are not taken into account at all as part of the public debt. Practical difficulties also arise when determining the amount of real budget expenditures for servicing public debt due to the balancing of individual indicators.
1.5 Public debt as a tool for regulating the economy
The main purpose of public debt is to be a tool for regulating the economy. This function is achieved by solving two problems:
§ fiscal- receive financial resources for the needs of the state;
§ regulating- use these funds to stabilize the economy and stimulate its growth.
The stabilizing effect on the economy is carried out through changes in either:
§ volume of government debt,
§ its structure, which makes it possible to influence the main macroeconomic indicators.
If the main government obligations are concentrated in the non-banking sector, then the state’s influence on the level of consumption, savings and investment will be more predictable: during an economic downturn, through loans, the state will mobilize the accumulation of funds, with the help of which government measures will stimulate the market situation. During periods of recovery and recovery, the government places its loans in the private sector by reducing the level of consumption and savings.
If government lending is carried out through the banking system, then the impact of public debt on the economic situation is more complex, since changes in consumption, savings and investment are carried out indirectly, through the banking system.
The impact of government debt on economic growth always depends on the intended purpose of government activities financed by government loans. Thus, the practice of state regulation in the 70-80s. suggests that the positive impact of deficit financing on employment is associated with cyclical unemployment. In conditions of structural unemployment, which has recently been typical for many developed countries, the government's stimulating budget policy leads to stagflation.
Thus, public debt is associated with state regulation of the economy, with the need to mitigate the contradiction between the economic and social needs of society and the possibility of meeting them using budget funds.
Government debt depends on the state of the economy. Therefore, the zero purpose of state credit resources is very important: what needs are state funds used for - to meet the economic and social needs of society or to increase the administrative expenses of the state, to ensure structural changes in social production or to enrich certain groups of the population.
In the second case, public debt is not a means of state regulation of the economy, but reflects crisis processes in the economy and therefore requires active stabilization measures by the state.
The main benefit for the state, which justifies the usefulness of public debt, is the ability to attract borrowed monetary resources to the budget and at the same time maintain the relative size of the debt - as a percentage of GDP (for a certain period of time, for the economic cycle).
The size of the budget balance and the volume of real gross domestic product are the two most important factors determining the dynamics of debt. A budget deficit leads to an increase in the volume of public debt, a budget surplus allows you to pay off the debt.
Economic growth ensures the filling of the budget revenues, through which interest on the debt is paid. It also allows you to increase the money supply in circulation without increasing inflation, and due to the growth of the money supply, conditions are created for debt refinancing. Depending on the relationship between these two factors, two approaches to determining the role of public debt in a market economy are conventionally distinguished.
Classic approachto determine the role of public debt in the economy is to use government loans as a substitute (substitute) for tax revenues. This approach is associated with the attitude to public debt as an instrument of stabilization macroeconomic policy.
In the phase of decreased business activity, budget revenues decrease. The government is interested in maintaining the level of spending, so the question arises of compensating for the decrease in budget revenues. When business activity of economic entities decreases, an increase in tax rates strengthens negative trends in the economy, so it is advisable to compensate for the decrease in budget revenues through government loans. Public debt becomes a substitute for tax revenues.
Public debt can successfully fulfill the role of a macroeconomic stabilizer only if there is sustainable economic growth. The phase of sustainable economic growth consists of alternating periods of increase and decrease in business activity of economic entities. During a period of decreased business activity, it is advisable to reduce the level of taxes and compensate for the decrease in revenue with borrowed monetary resources.
The concept " decline in business activity“means a short-term reduction in the rate of economic development, but the growth of real GDP should exceed 1% per year. If the growth rate of real GDP is less than 1%, then this means that there is an economic recession (It is accompanied by the bankruptcy of large companies, the deterioration of the banking system, increased unemployment, and decreased consumption).
During an economic downturn, it is advisable to reduce the size of public debt, since in this case public debt has a significant negative impact on both public finances and the economy as a whole.
The classic approach to determining the role of government debt in the economy is to use it as a substitute for taxes and the idea is that the volume of government loans is increased in the phase of declining business activity. In the phase of increasing business activity, the volume of loans is reduced. In the phase of economic downturn and in the period preceding the economic downturn, the volume of loans is minimized or the public debt is repaid ahead of schedule.
The classical approach provides the government with the opportunity not to change the level of taxation or even slightly reduce it in the phase of declining business activity, but at the same time maintain the level of government spending. This is the advantage of the classical approach.
Alternative Approachis based on the exact opposite concept - in the phase of declining business activity, the volume of loans is reduced. In the phase of increasing business activity, the volume of loans is increased. In the phase of economic downturn and in the period preceding the economic downturn, the volume of loans is minimized or the public debt is repaid ahead of schedule.
This approach has its own rational grain. This paradoxical scheme has a number of advantages over the classical one.
§ Firstly, the alternative approach, all other things being equal, allows one to attract a larger volume of monetary resources to the budget during the economic cycle.
§ Secondly, when implemented, there is a lower amplitude of fluctuations in the relative volume of debt during the economic cycle. The maximum value of the relative amount of debt over the period of the economic cycle is less.
§ Thirdly, the decision on the optimal size of government loans is made on the basis of data on the pace of economic development: the economy entered a phase of increased business activity - they increased loans, a decline in business activity occurred - they reduced loans, an economic recession occurred - they minimized loans. The risk of erroneous planning of the budget balance in this case is significantly lower.
Within the framework of the approach under consideration, public debt plays the role of a financial mechanism that accelerates economic development. Public debt can only be useful during periods of sustained economic growth. In the phase of economic recession, the budget deficit significantly worsens the state of public finances, increases the risk of a debt crisis and thereby leads to a deterioration in the overall condition of the economy. For China, public debt is a financial mechanism for accelerating economic development. For Russia, public debt remains an economic problem and does not bring any benefits to the state’s economy.
The two approaches (classical and alternative) are based on different meanings attached to the concept of “balanced” budget. In the European Community, the budget is considered balanced if two restrictions are met - on the size of the deficit (3% of GDP) and on the size of the debt (60% of GDP). Economic growth is impossible without increasing energy consumption, which means that it is necessary to build new power plants, lay oil pipelines, build ports, roads and other infrastructure. The issues of supporting economic growth are not easy in themselves; they have to be resolved in the context of international competition for resources and for the conditions of international trade.
2. Domestic public debt
2.1 The concept of internal public debt
Domestic public debt is a component of public debt for internal loans and other debt obligations to resident creditors.
The presence of domestic debt is not the exception in the economy, but rather the rule. Economically developed countries tend to have significant public domestic debt. However, there is a significant difference in the reasons, methods of formation and features of the functioning of this type of debt. Public debt and the deficits that cause it can be carefully thought out and planned factors in stabilizing the economy and its development.
Domestic public debt is considered as " the nation's loan to itself"and does not affect the overall size of the nation's total wealth. Certain negative consequences for its management are offset by the positive effects of mobilizing additional financial resources for investment or development of the country's economy. However, there are also a number of negative consequences of having internal public debt:
§ debt repayment is carried out at the expense of budgetary funds, i.e. at the expense of taxpayers: in this way, there is a flow of income to the owners of government securities, as a rule, wealthy sections of society;
§ To reduce debt, the government can increase taxes, which can lead to macroeconomic consequences such as decreased investment.
§ there is an effect of “crowding out investments” of private entrepreneurs, i.e. the state's entry into the loan market increases competition in the money market, which in turn leads to an increase in interest rates on money capital. This deprives the private sector of some part of investment and, accordingly, “slows down” the economic development of the country.
The main creditors of domestic debt are usually:
§population;
§corporations;
§banks;
§ other financial and credit institutions.
Domestic debt obligations can be divided into:
§ market, existing in the form of issue-grade securities
§ non-market, arising as a result of the execution of the federal budget and issued to finance the resulting debt.
While the issue and circulation of the former are sufficiently regulated and included in the internal borrowing program for the next financial year, the latter are issued irregularly despite the adoption of relevant legislative acts.
TO market instruments can be attributed:
§ government short-term bonds (GKOs)
§ federal loan bonds with variable and constant coupons (OFZ)
§ government savings loan bonds (GSLO)
§ domestic foreign currency loan bonds (“web bonds”)
To non-market instruments can be attributed:
§ bills of the Ministry of Finance
§ debt to the Central Bank, etc.
The number of types of government internal debt increased by one and a half times in 1997 alone, mainly due to non-market instruments. In 1996, domestic financing of the federal budget deficit was carried out mainly through the issuance of state bonds. In order to increase borrowing terms and reduce interest rates, federal loan bonds (OFZ) were introduced into circulation in June 1995.
The technology of placement, circulation and redemption of these securities completely coincides with the technology of issuing GKOs, therefore the disadvantage inherent in accounting for the costs of servicing the latter fully applies to this type of securities. Only balanced financial results are reflected in the corresponding budget item:
proceeds from the placement of GKOs - redemption of GKOs + proceeds from the placement of OFZs - redemption of OFZs - servicing of OFZs
Ignoring the economic essence of ongoing processes leads to a significant distortion of budget indicators.
2.2 Problems and controversies
Let us dwell on the main contradictions and problems that the system of government borrowing faces today. We should start with the features associated with the current state of public internal debt.
§ A deficit budget leads to an accelerated growth of public internal debt: during 1996 - twice (from 190 trillion to 380 trillion rubles), during 1997 - 1.8 times (up to 690 trillion rubles. ). If such growth rates are maintained, by 2000 the volume of public internal debt will be comparable to the value of GDP
§ All current budget underfinancing, which takes on surrogate forms, is written off as public debt. This is debt to agricultural enterprises, organizations carrying out northern deliveries, converted into treasury bills, a bond loan to repay commodity obligations and debt to the Central Bank of the Russian Federation, the Pension Fund, etc. The volume of obligations under GKO-OFZ as of January 1, 1998 will not exceed two-thirds the total volume of domestic debt.
§ The Central Bank and the Ministry of Finance of the Russian Federation concentrated their efforts on the narrow “bond” segment of the financial market. Debt management has come down to planning the volumes and circulation period of the next GKO-OFZ issue
§ There is a lack of medium- and long-term planning, including in the preparation of the draft federal budget, the composition and volume of public debt, as well as its repayment schedules. Without such a forecast, at least for a two- to three-year period, it is impossible to conduct a long-term analysis of the situation
§ The market for Russian government securities will become civilized only with an increase in the number of instruments and the share of long-term securities (with maturities of 5-30 years), which will happen no earlier than in two to three years. Management of state liabilities at the first stage requires ensuring a uniform approach to reflecting transactions with state debt obligations in the budget
§ The concepts of internal and external debt are gradually converging. This process is accelerated when using such a form of borrowing as the issue of securities, including those denominated in foreign currency. On the one hand, there is a massive influx of non-resident funds into the GKO-OFZ market (an instrument of internal borrowing), on the other hand, there is a confusion of concepts - “domestic foreign currency debt”, existing in the form of “web loans”.
With the admission of non-residents to the GKO-OFZ market, the main aggregates of the balance of payments of the Russian Federation changed, in particular, according to estimates of the Central Bank of the Russian Federation, the current account balance decreased in 1996 by $7 billion compared to the previous year. Today, the Central Bank is actually forced to take on the functions of a guarantor for transactions of non-residents with GKOs, which are not typical for it.
Such additional risks do not contribute to the solution of the main task entrusted to the Central Bank - maintaining the stability of the Russian monetary system. The accession of the Russian Federation to Article 8 of the IMF Charter and the transition to the convertibility of the ruble for current transactions will accelerate the process of “accretion” of two types of public debt. With the issuance of Eurobonds and their placement among both non-residents and residents, the task of maneuvering ruble and foreign currency liabilities takes on a completely different character.
Let's consider the main problems associated with the current state of public external debt:
§ Fundamentally different legal and economic approaches are practiced in relation to the external debt of the former USSR assumed by the Russian Federation, and the newly emerging debt of the Russian Federation. If the legal regime of the former is determined by the specifics of concluded international treaties, then the use of special economic approaches and the procedure for reflecting the latter in budget reporting is hardly justified
§ The serious problem associated with the debt of the former USSR is due to the role that Vnesheconombank historically played in settlements with foreign creditors. As audits conducted by the Accounts Chamber of the Russian Federation have shown, Vnesheconombank is an agent of the government of the Russian Federation for servicing external debt and managing debt assets of the former USSR and an agent of the government for servicing the internal foreign currency loan of the Russian Federation during 1992-1996. still operates outside the legal framework and copes extremely mediocre with the functions assigned to it. The status of Vnesheconombank can be brought into line with the complexity and significance of the tasks it solves only by introducing changes to federal legislation
§ Government operations to place Eurobonds, as well as the mechanisms implemented by the Central Bank of the Russian Federation for admitting non-residents to the external borrowing market (GKO-OFZ) have not yet received proper economic and legal assessment. The impact of these credit flows on Russia's balance of payments remains unstudied.
It should be noted that information about the activities carried out by the government and its agents to resolve issues related to Russian foreign debts and assets is unreasonably closed and is practically inaccessible even to auditors of the Accounts Chamber of the Russian Federation. This makes financial monitoring extremely difficult, complicates control over such transactions, and encourages abuse.
domestic public debt
2.3 Structure and dynamics of the internal public debt of the Russian Federation
The structure of the modern internal debt of the Russian Federation consists of:
§ Government zero-coupon short-term bonds (GKOs);
§ Federal loan bonds with a variable coupon (OFZ-PK), with a constant coupon income (OFZ-PD), with a fixed coupon (OFZ-FK) and with debt amortization (OFZ-AD).
Government zero-coupon short-term bonds(GKOs) have been issued since May 1993 on behalf of the Government by the Ministry of Finance. The guarantor of the functioning of GKOs is the Central Bank of Russia, which ensures the placement, savings and redemption of bonds. Their buyers can be not only legal entities, but also individuals. The issue of GKOs is carried out in the form of separate issues for periods of 3, 6, 9 and 12 months. Bonds exist only as entries in accounts.
Federal loan bonds(OFZ) - medium-term coupon bonds. There are various variations of these securities. OFZs with a variable coupon were issued on June 14, 1996 in accordance with the General Conditions for the Issue and Circulation of Federal Loan Bonds, approved by Decree of the Government of the Russian Federation of May 15, 1995 No. 458. Their issuer is the Russian Ministry of Finance. The issue of OFZ with a variable coupon is carried out in the form of separate issues, the terms of each issue are approved separately by the Ministry of Finance of the Russian Federation.
Let us consider the situation on the government bond market that developed in 2005. Announcement on the upgrade of the ratings of the Russian Federation for foreign currency and ruble borrowings by the Standard&Poor agency s dated January 31, 2005 caused a surge in demand not only in the market for foreign currency bonds of the Russian Federation, but also in the market for ruble securities, which made it possible to increase federal budget borrowing on the domestic market. Other factors in February were also favorable for the ruble bond market: the ruble exchange rate strengthened in nominal terms by 41 kopecks, the level of ruble liquidity remained high, and prices rose on the Russian foreign currency bond market.
From February 2 to February 16, 2005, six auctions were held for the placement and additional placement of ruble bonds, the total volume of attraction at which amounted to 23.4 billion rubles at par value.
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Topic: Public debt of the Russian Federation: problems and prospects
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INTRODUCTION……………………………………………………………………………….3
1. ESSENCE AND FEATURES OF PUBLIC DEBT……...5
1.1. Economic content of public debt…………………..5
1.2. The state as a guarantor and creditor……………………………………..13
1.3. Public debt management………………………………………….19
2. PUBLIC DEBT OF THE RUSSIAN FEDERATION…………...30
2.1. Reasons for the emergence of public debt of the Russian Federation…………………………………………………………………………………..30
2.2. Analysis of servicing and the current state of the state internal debt of the Russian Federation………………………………………………………40
2.3. Analysis of servicing and the current state of public external debt of the Russian Federation……………………………………………………….48
3. PROSPECTS FOR REDUCTION AND SOCIO-ECONOMIC IMPORTANCE OF THE PUBLIC DEBT OF THE RUSSIAN FEDERATION………………………………………………………………………………57
3.1. Prospects for reducing the public debt of the Russian Federation…………………………………………………………………………………..57
3.2. Socio-economic significance of the public debt of the Russian Federation…………………………………………………………………………………..71
CONCLUSION………………………………………………………………………………….75
LIST OF USED SOURCES OF LITERATURE…………78
APPLICATIONS………………………………………………………………………………….80
INTRODUCTION
For four centuries, government borrowing has helped Russian governments generate additional (along with budgetary) financial resources and provide financing for urgent needs in the defense, economic and social fields. Loans and credits attracted by the state played a particularly large role in the socio-economic development of the country in the second half of the nineteenth century; at the beginning of the twentieth century they provided financing for military expenditures.
After the cancellation of the state debt of pre-revolutionary Russia in 1918. During the years of the New Economic Policy (NEP), the Soviet government had difficulty restoring the functioning of the government borrowing market. The loans worked successfully to financially stabilize economic growth. However, at the end of the twenties, a transition was made to the placement of government loans by subscription among the population. Loans became widespread and essentially forced. This led to a catastrophic increase in public debt. In 1957 The government was forced to resort to freezing the debt obligations of states. After that, only one three percent winning loan was circulated in the country. Its bonds were sold and bought by savings banks at centrally set prices.
With the transition to the formation of the foundations of a market economy in the early 90s, Russia was faced with a lack of domestic experience in organizing and maintaining government debt operations and adequate work in a free market. In this regard, it was necessary to actually train specialists anew, while simultaneously turning to the traditions of the past and the experience of developed countries with market economies.
Problems associated with managing public debt, its regulation, and choosing the right debt policy are still quite relevant. Despite the fact that in recent years the situation in the government borrowing market has changed a lot, and for the better, we should not forget that any wrong step can lead to serious problems in the future. To avoid this, it is necessary to regularly monitor the process of issuing government loans, issuing government loans and guarantees. It is possible to correctly assess the situation only by knowing all the features of public debt, its management and having studied the accumulated experience.
The purpose of the work is to consider the essence and characteristics of public debt, study its current state and socio-economic significance, and analyze the prospects for reducing the public debt of the Russian Federation.
The purpose of the work required solving the following problems:
Reflection of the economic content of public debt;
Consideration of the state as a guarantor and creditor;
Consideration of the concept of public debt management;
Analysis of the causes of public debt in the Russian Federation;
Analysis of servicing the public debt of the Russian Federation and its current state;
Reflection of the prospects for reducing Russia's public debt and its socio-economic significance.
To solve the above problems, the following materials were used: Budget Code of the Russian Federation, Federal Budget of the Russian Federation for 2008-2010, textbooks on public debt, periodical materials, information from the websites of the Ministry of Finance and the Ministry of Economic Development and Trade.
1. ESSENCE AND FEATURES OF PUBLIC DEBT
1.1. Economic content of public debt
With the advent of the state, its needs arose, which had to be financed. This gave rise to such financial categories as state taxes, expenses, and the budget. With the development of the state, its functions expanded and its needs grew. This led to an increase in government spending. However, tax revenues soon became insufficient to cover them. This contributed to the emergence of new forms of government revenue – non-tax payments.
Over time, taxes and non-tax revenues turned out to be insufficient to cover all government expenses, and the state was forced to resort to loans from monasteries, moneylenders, rich feudal lords and the like. The monarch and his government directed the funds obtained through loans into the general fund of financial resources and used them to cover government expenses, and the debts were settled through tax and non-tax revenues. Borrowing was the first and most common form of government debt.
State credit is a specific relationship regarding the redistribution of part of the value of the gross domestic product and national wealth, foreign loan capital, associated with the formation of an additional fund of financial resources of authorities to the budget and the use of budget (less often, borrowed) funds on a repayable basis or to provide guarantees. In these relations, the authority acts as a borrower, guarantor or lender.
The peculiarity of public debt as a financial phenomenon is the repayment, urgency and payment of the funds lent. However, this relationship should not be confused with a bank loan. Private loan capital is used for lending to business entities in order to ensure the uninterrupted process of expanded reproduction and increase its efficiency. Bank lending reflects the mainly productive use of loan capital (or for the purpose of developing the social infrastructure of production teams). The use of credit resources as capital creates conditions for repaying the loan and paying interest by increasing the added value produced.
When it comes to public debt, the borrowed funds come to the disposal of public authorities, turning into their additional financial resources. They are, as a rule, used to cover the budget deficit, and the source of repayment of government borrowings and interest payments on them are budget funds or new borrowings.
The principle of repayment implies the return of borrowed funds.
The principle of urgency means that the loan agreement must establish a loan period and this period must be observed by the borrower.
The principle of payment is that for the use of borrowed funds, the borrower, as a rule, pays the lender a loan interest.
Features of a state loan are the lack of security, the lack of a targeted nature, as well as the supreme role of the state, despite the fact that the state is a borrower and not a lender.
The positive impact of the distribution function of a government loan is that with its help, the tax burden is more evenly distributed over time, that is, taxes that are levied during the period of financing expenses through a government loan do not increase.
The objective need to use state credit to meet the needs of society is due to the constant contradiction between the magnitude of these needs and the state’s ability to satisfy them at the expense of budget revenues. Financial support for enterprises, the social policy of the state, and the fulfillment of its functions for the defense of the country and its management require constantly increasing budget expenditures. The international activities of the state also cost a lot of money. Meanwhile, state budget revenues are always limited by certain limits - the level of economic development, the size of the tax burden, current legislation and many other factors. Therefore, authorities resort to government loans as a tool for mobilizing additional funds.
The feasibility of using borrowing to generate additional financial resources of public authorities and cover the budget deficit is determined by significantly less negative consequences for public finances and the country’s monetary circulation compared to monetary methods (for example, issuing money) of balancing government revenues and expenses. Minimizing damage is achieved by moving demand from individuals and legal entities to government agencies without increasing aggregate demand and the amount of money in circulation.
The possibility of the existence of state credit, and as a consequence of state debt, follows from the peculiarities of the formation and time of use of income received by citizens and organizations. The population constantly generates temporarily free funds, primarily due to the uneven receipt of income from employment (especially in industries with a seasonal nature of production), payment of fees, bonuses, vacation pay, receipt of inheritance, and the like. The population may deliberately limit current needs due to the need to save money to purchase durable goods with a high acquisition price. Forced savings are also formed among the population in connection with such negative phenomena as economic imbalance and commodity shortages.
Similar trends occur in the cash flow of organizations. Large temporary fluctuations in receipt of revenue from the sale of products (works, services) may occur due to the duration of the production cycle or seasonal production. Legal entities may have temporarily free financial resources due to uneven implementation of large capital investments in production or the social sphere. Organizations' reserve funds may be temporarily free. With the growth of the efficiency of social production, the possibilities of attracting funds from business entities to the sphere of state credit will increase.
The possibility of functioning of state credit relations is significantly supported by the constant presence of significant free capital in international financial markets.
Government loans are characterized by the fact that temporarily free funds of individuals and legal entities are attracted through the issue and sale of government securities. The main type of securities symbolizing the debt obligation of a government agency is a bond. It gives its owner the right to receive income, and after a certain period - to receive back the borrowed funds. By selling a bond, the authority undertakes to repay the amount of debt at a certain time with interest or pay creditors income during the entire period of use of the borrowed funds.
The state sets the nominal value (nominal price) of the bond. It is indicated on the security and expresses the amount of money that is paid to the owner of the bond at the time of its redemption and on which interest is charged. The interest income set to the face value of the bond expresses the nominal yield of the loan.
However, the real yield of a bond to its holder may be higher or lower than the stated nominal interest. This is due to the fact that bonds are sold at a market price that deviates from their face value. This deviation is called exchange rate difference and depends on a number of factors. These include, in particular, the value of the nominal interest, the level of the refinancing rate, the time of purchase of the bond, the degree of saturation of the stock market with state and municipal securities, the degree of public confidence in the government.
In conditions of centralized methods of economic management and the absence of a stock market, the public authority sells bonds at the official exchange rate price. Its value is influenced only by part of the factors listed above, and even then in the direction of its increase. The real exchange rate price of bonds and their attractiveness for lenders can only be determined if state and municipal securities are freely circulated on the financial market. A significant deviation in the rate of loan bonds from their nominal value indicates serious shortcomings in the state's debt policy and the need for its urgent adjustment. The free quotation of public bonds on the market is a mechanism for taking into account all factors that affect the exchange price of income-bearing securities.
For loans attracted by public authorities, it is characteristic that investors directly (without mediating these operations by purchasing state and municipal securities) transfer part of the loan resources to cover the expenses of the federal government, executive authorities of the constituent entities of the Russian Federation or local government. Direct borrowing of funds can be carried out, in particular, among state and commercial banks, international financial organizations, and foreign governments.
Government borrowing, carried out in the form of loans and credits, leads to the formation of additional (along with budgetary) financial resources that authorities use to meet public needs. This is exactly what the purpose of government borrowing is to obtain additional funds. Therefore, government borrowing can be defined as a relationship regarding the redistribution of temporarily free funds of legal entities and individuals, foreign governments and international financial organizations in the form of government loans and credits, as a result of which the borrower state generates additional financial resources.
It should be added that as a result of attracting loans and credits, the state incurs debt obligations. This fact cannot be denied, but it is also obvious that the state borrows not to increase its debt, but to obtain additional financial resources. The formation and increase of public debt is an unpleasant but inevitable consequence of achieving the initial goal - obtaining additional sources of financing public needs.
I would like to note that public debt can be classified according to a number of criteria. Typically, the following are used as such: economic indicator (a set of components), type of borrower, form of debt obligations, maturity of debt obligations, borrowing market, type of lender, borrowing currency, official (budget) indicator.
Depending on the components, public debt can be capital, basic and current. Capital debt represents the entire amount of debt obligations issued and outstanding by the government and the obligations of others guaranteed by it, including the interest that must be paid on these obligations. Principal debt is the face value of all government debt obligations and borrowings guaranteed by it. Current debt consists of upcoming expenses to pay income to creditors for all debt obligations assumed by the state and to repay obligations that have become due.
According to existing levels of government (classification by type of borrower), public debt is divided into public debt of the Russian Federation, public debt of the constituent entities of the Russian Federation and municipal debt.
Public debt can exist in the following forms: loan agreements and contracts; state and municipal loans; contracts and agreements on receiving budget loans and budget credits from budgets of other levels of the budget system of the Russian Federation; agreements on the provision of state and municipal guarantees; agreements and agreements on the extension and restructuring of debt obligations of previous years.
By maturity, debt obligations are divided into short-term (up to one year), medium-term (over one year to five years) and long-term (over five years). In Russia, the maturity of debt obligations is limited for the Russian Federation and the constituent entities of the Russian Federation to thirty years (according to Articles 98, 99 of the Budget Code of the Russian Federation), and for municipalities - ten (Article 100 of the Budget Code of the Russian Federation).
Depending on the borrowing market, the type of lender, or the currency of borrowing, government debt can be domestic or foreign. In accordance with Article 98 of the Budget Code of the Russian Federation, the volume of state internal debt of the Russian Federation includes: the nominal amount of debt on government securities of the Russian Federation, obligations for which are expressed in the currency of the Russian Federation; the volume of principal debt on loans received by the Russian Federation and the obligations for which are expressed in the currency of the Russian Federation; the volume of principal debt on budget loans received by the Russian Federation. The volume of government external debt of the Russian Federation includes: the nominal amount of debt on government securities of the Russian Federation, the obligations for which are denominated in foreign currency; the volume of principal debt on loans received by the Russian Federation and liabilities for which are expressed in foreign currency, including targeted foreign loans (borrowings) raised under state guarantees of the Russian Federation; the volume of obligations under state guarantees of the Russian Federation, expressed in foreign currency.
Based on the holder of securities, domestic government loans are divided into those placed only among the population, only among legal entities and universal.
Depending on the form of income payment, domestic government loans are divided into interest-bearing loans, winning loans, interest-winning loans, win-win loans and interest-free (targeted) loans.
According to the method of placement, domestic government loans are voluntary, placed by subscription and forced.
1.2. State as guarantor and creditor
The state in credit relations can act not only as a borrower, but also as a guarantor and lender. If the state gives guarantees for loans (credits) obtained on the financial market by other persons, then it plays the role of a guarantor. By issuing loans at the expense of budgetary funds (less often, at the expense of funds formed on a borrowed basis), the state acts as a lender, and the other party acts as a borrower.
In accordance with the nature of the operations (in their modern, expanded form), government credit relations manifest themselves in the form of government borrowing, government guarantees (guaranteed borrowings) and government loans.
Government borrowing has been described in some detail above.
Now I would like to take a closer look at government guarantees and loans.
It is necessary to distinguish between government borrowing and government guarantees.
Guarantees can be provided by authorities at all levels to other persons for their obligations to third parties. In particular, federal government bodies can issue guarantees for loans and credits attracted by constituent entities of the Russian Federation, local governments, state and non-state business entities.
State guarantees are provided for loans and credits attracted by the authorities of the constituent entities of the Russian Federation, local governments, and business organizations.
On behalf of the Russian Federation, state guarantees are provided by the Government of the Russian Federation. In all negotiations on the provision of state guarantees to the Russian Federation, the Government of the Russian Federation is represented by the Ministry of Finance of Russia or another authorized body. They also enter into relevant agreements on behalf of the Government of the Russian Federation.
For each case of provision of a state guarantee, a resolution of the Government of the Russian Federation is adopted, in accordance with which the Ministry of Finance of the Russian Federation concludes a guarantee agreement with the issuer or creditor. The agreement stipulates in detail all the terms of the transaction, including the sources and procedure for repaying the obligation and paying income on the loan or credit.
Loans and credits raised under government guarantees are called guaranteed loans (credits). Providing government guarantees leads to the formation of public debt. However, it is not at all necessary that the state will fully repay the obligations of another person guaranteed by it. But even in the case when the borrower regularly fulfills its obligations, the state has very real expenses, in particular, the costs of issuing a guarantee and reserving funds to secure the guarantee.
The state bears the full financial burden for the obligations guaranteed by it in cases where the borrower cannot pay creditors due to objective circumstances or due to the borrower’s bad faith.
Guaranteed loans are of great socio-economic importance, since they help solve the economic and social problems of a region or enterprise, strengthen the confidence of internal and external investors in the borrower, help organize the movement of financial flows in the desired direction and attract external investment into the national economy.
The use of guaranteed loans is a common practice for any state, including the Russian Federation.
According to the Budget Code of the Russian Federation, a written form of the state guarantee is mandatory. It, in particular, indicates information about the guarantor, including the name of the body that issued the guarantee on behalf of the guarantor; an obligation that is secured by a guarantee; guarantee amount. The guarantee period is determined by the period of fulfillment of the obligations for which the guarantee is provided. Guarantees are provided, as a rule, on a competitive basis.
The guarantor under his guarantee bears subsidiary liability in addition to the liability of the debtor under the guaranteed obligation. The guarantor's liability is limited to the amount for which the guarantee is issued. If the guarantor had to fulfill the obligation of the recipient of the guarantee, then he may demand reimbursement from the latter of the amount paid to a third party under the guarantee.
In Russia, favorable conditions have been created for the active use of guaranteed loans and credits in connection with the granting of the right to constituent entities of the Russian Federation, local governments, and individual economic structures to conduct operations to borrow funds on the domestic and foreign financial markets.
Article 115 of the Budget Code of the Russian Federation defines a state guarantee as a method of ensuring civil obligations, by virtue of which the guarantor state gives a written obligation to be responsible for the fulfillment by the person to whom the guarantee is given of obligations to third parties (in whole or in part).
Thus, the content of state guarantee operations and the interpretation of this phenomenon in Article 115 of the Budget Code of the Russian Federation do not give grounds to say that by providing a guarantee to another person, the state itself turns into a borrower. Of course, another person remains the borrower, the real recipient of the funds. And the guarantor state acquires only the obligation, under certain circumstances, to fulfill the obligation of the actual borrower to the lender.
The above means that government borrowing and government guarantees are phenomena of different properties. Government borrowing is carried out by the state itself in order to obtain additional financial resources, and government guarantees are provided to other persons in order to facilitate or enable them to borrow. However, government guarantees are included in government debt. Moreover, the total amount of guarantees of the Russian Federation in the currency of the Russian Federation is included in the state internal debt, and in foreign currency - in the external debt of the Russian Federation.
It should also be noted that the state can also act as a creditor.
In conditions of developed commodity-money relations, the state can attract free financial resources of economic structures and funds of the population to cover its expenses.
The main way to obtain them is a government loan. It expresses the relationship between the state and numerous individuals and legal entities regarding the formation of an additional monetary fund, along with the budget, in the hands of the state. When carrying out credit operations within the country, the state is usually the borrower of funds, and the population, enterprises and organizations are the lenders. However, the state may also find itself in the role of a creditor. This phenomenon occurs not only in the sphere of interstate relations, but also in internal financial life through the use of treasury loans.
State credit is one of the forms of credit relations that has the following characteristics of a credit: the presence of a lender and a borrower as legally independent subjects of a credit transaction; accumulation of free funds of the population, enterprises and organizations on the principles of repayment of urgency and payment (in exceptional cases, interest-free borrowing of resources is allowed); the possibility of using government credit operations within the country and in international relations.
With the help of a state loan, the state mobilizes additional financial resources to finance general government expenses and perform its functions. The objective need to use government credit is explained by the contradictions between the growing needs of society and the possibility of meeting them from budget revenues. By its economic nature, the state budget redistributes part of the country's national income.
Article 122 of the Budget Code of the Russian Federation characterizes state credit as follows.
External debt claims of the Russian Federation are financial obligations of foreign states and (or) foreign legal entities to the Russian Federation as a creditor, including debt claims arising in connection with the provision by a bank - agent of the Government of the Russian Federation of state export loans to foreign borrowers or their creditor banks, and also debt claims of legal entities - exporters of the former USSR to foreign legal entities that arose before January 1, 1991 in connection with the export of goods and services from the former USSR, carried out at the expense of the budget of the former USSR.
The Budget Code distinguishes between state financial and export credits.
A state financial loan is a form of budget loan in which the Russian Federation provides funds to a foreign borrower in the amount and on the terms provided for by the relevant agreement between the Government of the Russian Federation and the government of a foreign state.
State export credit is a form of budget loan in which, at the expense of budget funds, payment is made for goods and services exported in favor of a foreign borrower - an importer of goods and services, in the amount and on the terms provided for by the relevant agreement6m between the Government of the Russian Federation and the government of a foreign state or a corresponding agreement between a bank - agent of the Government of the Russian Federation and a foreign borrower - an importer of goods and services or its creditor bank, in the presence of a state guarantee of a foreign state for the repayment of this loan, payments for repayment and servicing of which are made in favor of the Russian Federation.
I would also like to highlight such concepts as budget credit and budget loan.
A budget loan is money provided by the budget to another budget of the budget system of the Russian Federation, a legal entity (with the exception of state (municipal) institutions), a foreign state, a foreign legal entity on a repayable and reimbursable basis.
As can be seen from the definition, a budget loan is not limited in terms of validity. A budget loan is provided for a period of no more than six months within a financial year.
The only ways to ensure the fulfillment of obligations to repay a budget loan can be bank guarantees, sureties and property pledges.
1.3. Public debt management
Management is inherent in all spheres of human activity, including financial ones. Management is understood as a conscious and purposeful influence on the object of control using a set of techniques and methods to achieve a certain result. Management is based on knowledge of the objective laws of development of nature and society. At the same time, management is greatly influenced by the state represented by the relevant structures, as well as legislative acts.
An important area of management activity is public debt management.
Management of the public debt of the Russian Federation is carried out by the Government of the Russian Federation or the Ministry of Finance of the Russian Federation authorized by it.
Management of the public debt of a constituent entity of the Russian Federation is carried out by the highest executive body of state power of a constituent entity of the Russian Federation or the financial body of a constituent entity of the Russian Federation in accordance with the law of the constituent entity of the Russian Federation.
Management of municipal debt is carried out by the executive and administrative body of the municipality (local administration) in accordance with the charter of the municipality.
Public debt, like finance, can be a lever and an object of management. As a lever of control, public debt provides the opportunity for legislative (representative) and executive authorities to influence money circulation, the financial market, investment, production, employment, the population’s organization of their savings and many other economic processes.
The state determines the relationship between various types of debt activities (government borrowing, loans, guarantees), the structure of types of debt activities by maturity and profitability, the mechanism for constructing specific government loans, loans and guarantees, the procedure for issuing and circulating government loans, the procedure for providing government loans, the procedure for providing state guarantees and fulfillment of financial obligations under them. The state establishes all other necessary practical aspects of the functioning of the public debt.
In the process of managing the public debt of the Russian Federation, the following general tasks are solved:
Maintaining the amount of internal and external public debt at a level that ensures the preservation of the economic security of the country, the fulfillment by authorities of their obligations without causing significant damage to the financing of socio-economic development programs;
Minimizing the cost of debt by extending the borrowing period and reducing the yield of government securities, moving to other markets and shifting attention to other groups of investors;
Preserving the reputation of the Russian state as a first-class borrower based on the impeccable fulfillment of financial obligations to investors;
Maintaining stability and predictability of the government debt market;
Achieving effective and targeted use of funds borrowed by the state and borrowings guaranteed by it;
Diversification of debt obligations by borrowing terms, profitability, forms of income payment and other parameters to meet the needs of different groups of investors;
Coordination of actions of federal bodies, bodies of constituent entities of the Russian Federation and local governments in the country’s debt market.
Public debt management can be strategic or operational. Perspective issues of development of public debt are within the competence of the Federal Assembly, the President of the Russian Federation and the Government of the Russian Federation, legislative (representative) and executive authorities of the constituent entities of the Russian Federation. Executive bodies prepare draft federal and regional laws (the Federal Assembly and the President of the Russian Federation, representative bodies and heads of administrations of the constituent entities of the Russian Federation also have legislative initiative), the Federal Assembly of the Russian Federation and the legislative bodies of the constituent entities of the Russian Federation adopt them, and the President of the Russian Federation and heads of regional administrations reject them or sign them.
In particular, every year in the law on the federal budget, the Federal Assembly and the President of the Russian Federation establish maximum amounts of state internal and external debts; sources of internal financing of the budget deficit, including income from the issue of government securities; maximum amount of external borrowings; maximum amounts of government loans to foreign CIS member states; directions of use, terms of provision and maximum amounts of budget credits (loans) to legal entities and constituent entities of the Russian Federation; upper limits of government external borrowings and government loans provided by Russia and the guarantee program of the Government of the Russian Federation.
Operational management of public debt is carried out by the Government of the Russian Federation and its special body - the Ministry of Finance of the Russian Federation, as well as the Central Bank of the Russian Federation and Vnesheconombank as agents of the Ministry of Finance of the Russian Federation. These bodies determine the general conditions for the issuance of individual loans, the procedure for the issue and circulation of debt obligations, the time of issue of the next loan and the conditions for its functioning, organize the primary placement and secondary market of government securities, organize and carry out the payment of income and repayment of debt obligations, organize and carry out the issuance of government (budget) loans and government guarantees, carry out control actions and other measures for the operational management of public debt.
Similar issues are resolved within the framework of their competence by the legislative and executive bodies of the constituent entities of the Russian Federation. At the same time, they proceed from the norms laid down in federal legislation.
Management stages should be distinguished. We can distinguish at least the following five enlarged stages, at each of which specific tasks are solved.
At the first stage, the process of substantiating the maximum volumes of state internal and external debt, the maximum volumes of state internal and external borrowings, the maximum volumes of state guarantees is underway, and programs for state internal and external borrowings are being formed. It is at this stage that the severity of the future total debt burden is laid down, including separately for internal and external debt, and the types of upcoming borrowings.
At the second stage of government debt management, a program for issuing government securities is formed and specific parameters of upcoming borrowings are determined in terms of circulation periods, the level of probable profitability, the procedure for paying income, restrictions on owners, the placement procedure and other conditions that make each borrowing original and attractive for resident investors and non-residents. The quality of work performed at the second stage determines, in particular, the presence or absence of “peaks” in debt payments in the future, as well as the timely receipt of resources to repay previously made borrowings in the order of their refinancing.
At the third stage, bonds are placed and quotations for government debt are regulated on the secondary government debt market. The impact on government bond quotes makes it possible to regulate the budgetary efficiency of borrowings and the amount of current (domestic and external debt).
The fourth stage - anti-crisis management - is associated with the implementation of measures, the need for which is determined by the presence of problem debts or crisis debt situations, the abundance of which has marked recent Russian history in the period after the collapse of the USSR. If the government is unable to service and repay its debts, then it enters into negotiations with creditors to revise the payment schedule and debt repayment terms. As a result of negotiations, the parties may come to an agreement on deferment of payments, debt restructuring, partial or complete debt write-off, early redemption of obligations, innovation, securitization, etc.
The fifth stage is the implementation of original or adjusted payment schedules for servicing and repaying government internal debts.
Thus, public debt management should be understood as a set of measures to regulate its volume and structure, determine the conditions and implement new borrowings, regulate the government borrowing market, implement measures for anti-crisis management of problem debts, service and repay debt, determine the conditions and provide government guarantees, control for the effective use of borrowed funds.
Traditionally, in economic theory, the problem of optimal management of public debt is considered mainly within the framework of two types of models: an equilibrium model of dynamic taxation, which involves maximizing the welfare function of a representative consumer, and a model with direct minimization of the social loss function. In addition to these two groups of functions used in theoretical studies, from a practical point of view, the type of objective function of the debt management authority can be divided into two types: minimizing budget risk as much as possible with a minimum debt service cost and minimizing the service cost. First, let's look at the key theoretical models within the first subclassification.
In principle, the general form of the social loss function is determined by solving the problem of a representative consumer: the distorting influence of proportional taxes or inflation in most works is reflected in the form of a quadratic dependence of losses on the level of taxes or inflation. In a number of cases, it is assumed that losses, for example from inflation, arise only due to deviations of the actual level from some target or expected level, therefore, in the corresponding planner function, the square of not the absolute level of inflation or taxes, but precisely such deviations, is minimized.
In practical terms, the objective function of debt management is typically defined as “minimizing fiscal risk combined with low debt servicing costs.” Moreover, the fact that risk minimization comes first is not accidental. Global theoretical and practical experience in the field of effective management of government liabilities has shown that the policy of minimizing budgetary risk, including not only the traditional refinancing risk, but also risks caused by macroeconomic shocks, such as output or government spending, in its pure form is dominant compared to the pure strategy minimizing costs. Moreover, if the expected yields on government securities reflect solely risk-return, the government should only be concerned with minimizing risk. A pure strategy of minimizing debt service costs can be considered only when the risk premium is determined by market imperfections, information asymmetries, persistent errors in investor expectations, or a lack of confidence in government policies.
In efficient and complete markets, where the government is free to use different contingent requirements, the strategies described above are, generally speaking, completely different strategies. Thus, if the public debt authority's goal is to minimize the expected costs of servicing the public debt, the optimal strategy would be to issue low-risk bonds to investors, that is, claims that pay high returns in states with low capital returns and labor, and low in the opposite situation. Meanwhile, if the government pursues the goal of minimizing fiscal risk, it will, on the contrary, be interested in issuing obligations that pay low income in states of low income and high budget expenditures, and vice versa.
Given the close positive correlation between gross output in the economy and the income of economic agents, in this situation there is an obvious conflict between the optimal strategy in terms of minimizing service costs and minimizing risk. In fact, we are talking about redistributing macroeconomic risks and providing a kind of insurance in the first case to investors, and in the second
Signs of classification of government loans: according to the entity exercising the right to issue debt obligations, based on the holders, source of borrowing, relation to the secondary market. Requirements for the conditions of issue and circulation of government loans.
The essence of budget balancing management. Short-term and long-term budget imbalances. Monetization as a way to reduce the budget deficit; increase in the amount of money in circulation. The concept of state and municipal debt.
The concept of external public debt. The history of the emergence of public external debt of the Russian Federation and its current state. Structure of the state external debt of the Russian Federation. Management of public external debt.
Budget expenditures in 2011-2013 to finance health care, physical education and sports. The concept of the budget process, the exclusive powers of the Minister of Finance in it. Data characterizing the dynamics of the external debt of the Russian Federation.
State and municipal debt management
The structure of public debt and the legal framework for its resolution. Features and differences of internal and external public debt, measures to stabilize them in the Russian Federation. Current status and methods of debt management.
Relations regarding the provision of temporarily free funds on the terms of payment and repayment; activity of the state as a borrower, lender, guarantor. Methods of public debt management; investment tax credit.
The essence and significance of public debt and government guarantees. Analysis of Russia's external and internal debt for 2007–2009, development of a strategy for managing it, features of the implementation of this process in the context of the global financial crisis.
Debt relations: concept, essence, types, need for borrowing. Classification and forms of public debt. Analysis of the current dynamics and structure of the external debt of the Russian Federation. Problems of management and repayment of public debt.
General characteristics of state and municipal borrowing in foreign countries. Goals and objectives of the activities of special bodies for their management. Features of borrowing activities and servicing state and municipal debt abroad.
Sources of financing the federal budget deficit. Structure of sources of financing the budget deficit. Total external and internal debt. The volume of payments to repay external debt. Volumes of use of the stabilization fund.
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Features of public debt
Introduction
1.Economic content of public debt
1.2 Economic component of public debt
4.1 Debt strategy
4.3 Management objectives
4.4 Means of achieving goals
5. Public debt of the Republic of Belarus
Conclusion
List of sources used
Introduction
Public debt plays a significant and multifaceted role in the macroeconomic system of any country. This is explained by the fact that relations regarding the formation, servicing and repayment of debt have a significant impact on the state of public finances, monetary circulation, investment climate, consumption patterns and the development of international cooperation.
The reason for the emergence of public debt is the policy pursued, which does not ensure a balance between government revenues and expenditures.
At the same time, there is not a single country in the world that, at one time or another in its history, has not faced this problem. Government debt is an integral part of most financial systems. World practice shows the widespread use of borrowing policy to finance budget expenditures. Thus, public debt is a normal phenomenon in the financial economy of every civilized country.
External borrowing enables a country to consume and invest beyond the limits of current domestic production and savings by attracting foreign financial resources. If external borrowed resources are used to finance new means of production, then the overall rate of economic growth can be accelerated.
Attracting external loans is a fairly common phenomenon and is generally accepted in international practice. Both developed countries and countries developing their economic institutions resort to external loans. External borrowings are primarily aimed at financing the state budget deficit and developing the real sector of the economy.
Today, the problem of managing public debt and assessing the country's debt burden is very acute. This issue is especially acute in connection with the outbreak of the debt crisis in Europe. All of the above determines the relevance of the chosen topic.
The purpose of writing this course work is to study the structure of public debt, characteristics of public debt (external and internal). The problem of managing public debt and assessing the country's debt burden.
The course work poses the following tasks. Theoretically consider the economic content of public debt. Define external and internal public debt. Understand what public debt management is all about. Analyze the state of public debt in the Republic of Belarus in recent years.
The subject of this course work is public debt as part of the economic policy of the state. The problem of the role and place of public debt in the state economy is posed, and the problem of its occurrence is considered.
To achieve this goal, methods of analysis, synthesis, and description were used. For a more detailed and structural study of public debt, methods of analogy, idealization, and a combination of logical and historical were used. All of the above allowed us to study the topic in detail, structurally and fully display the assigned tasks.
1. Economic content of public debt
Belarus national debt
1.1 Essence, forms and types of public debt
The national debt is the total amount owed by the federal government to holders of government securities equal to the sum of past budget deficits (minus budget surpluses).
The question arises, why does public debt appear? From a long-term historical perspective, the answer is twofold: wars and recessions were the causes. Let's look at these reasons. During a war, the state is faced with the task of reorienting a significant part of the economic resources from the production of civilian products to the needs of military production. Accordingly, government spending on armaments and maintenance of military personnel will increase. There are three options for financing this spending: increase taxes, print enough money, or use deficit financing. Financing through taxes can lead to tax increases to levels that undermine the incentive to work, which is not beneficial during a war. Printing and spending more money will create strong inflationary pressures. Consequently, most of the costs must be financed by selling bonds to the public. This way, a significant share of expendable income will remain and resources will be freed from civilian production, which can then be used in military industries.
The second source of government debt is recessions. During periods when national income declines or fails to increase, tax revenues automatically decline and tend to cause deficits.
In addition to these most obvious sources of public debt, there are others:
Implementation of major government programs. Structural restructuring of the economy. In such cases, a budget deficit may be justified because significant government spending will contribute to economic growth;
Rising inflation, which entails a sharp increase in government spending beyond the prescribed amount. (state budget revenues depreciate, and expenses rise, since the government is forced to purchase necessary goods and services at higher prices);
Expansion of transfer payments, introduction of tax breaks and adoption of other popular measures in certain periods of the life of the state (for example, in pre-election years, etc.).
A distinction is made between capital public debt, that is, the entire amount of issued and outstanding government loans, including interest that must be paid on these obligations, as well as current debt - expenses for paying income to creditors on all debt obligations of the state and for repaying obligations that have become due. .
Depending on the creditor, internal and external public debt are distinguished: External debt - borrowings attracted from foreign sources (foreign states, their legal entities and international organizations) credits (loans), for which public financial obligations arise of the borrower of financial resources or the guarantor of repayment of such credits (loans) ) other borrowers; Domestic debt is obligations of the state issued in national currency in order to attract temporarily free funds from residents of the country (individuals and legal entities).
Government debt can be in the form of:
loan agreements and contracts concluded on behalf of the government as a borrower with credit institutions, foreign states and international financial organizations;
government loans made by issuing securities on behalf of the government;
contracts and agreements on obtaining budget loans and budget credits from budgets of other levels (local budgets, budgets of federal lands, etc.);
agreements on the provision of state guarantees;
agreements and treaties, including international ones, concluded on behalf of the government, on the extension and restructuring of debt obligations of previous years.
The basis for the formation of public debt is the budget deficit. When identifying a state budget deficit, first of all it is necessary to establish: its economic nature, quantitative assessment, possible economic sources of coverage, socio-economic consequences. Formally, the size of the state budget deficit is determined by the equation of income and expenditure. There are various ways to cover the budget deficit - this is an increase in taxes, a decrease in government spending, emission, or resort to borrowing. Converting the budget deficit into public debt, this method consists of financing the deficit by resorting to internal and external borrowing.
The use of domestic borrowing as a source of covering the budget deficit is the issue by the state of securities (government bonds and treasury bills), selling them to the population and using the funds received to finance the excess of government expenditures over revenues.
The advantages of this method are:
It does not lead to inflation since the money supply does not change, so in the short term it is a non-inflationary method of financing;
This is a fairly expeditious way, since the issue and placement (sale) of government securities can be ensured quickly.
However, this method also has significant disadvantages:
First of all, debts must be paid. It is obvious that the population will not buy securities if they do not generate income. unless interest is paid on them (payment of interest on government securities constitutes servicing the government debt). The larger the government debt (the more securities issued), the more money must be spent on servicing the debt. And the payment of interest on government securities is part of the state budget expenditures, and the greater they are, the greater the budget deficit. It turns out to be a vicious circle: the state issues securities to finance its budget deficit, paying interest on which provokes an even larger deficit.
In addition, it has been proven that this method is non-inflationary only in the short term, but in the long term it can lead to fairly high inflation (the state, using this method, refinances the debt).
Financing the budget deficit using an external loan, i.e. a loan from other countries or international financial organizations represents the possibility of obtaining large sums in conditions where an internal loan is for some reason impossible or impractical, and financing the budget deficit through emission creates a threat of high inflation. However, at the same time, when circulating and external debt, after the loan expires, national income leaks abroad, since the debt must be repaid and interest paid on it (served), which leads to a reduction in domestic production and a decline in the economy. The solution to this problem is to refinance the government debt. That is, by resorting to new borrowing, the state pays off old debts.
Currently, there are 3 main points of view on whether the state budget deficit and public debt are a negative or positive phenomenon.
The first of them, called monetarist, proceeds from the fact that the budget deficit is a negative phenomenon, since it intensifies inflationary processes, crowds out private investment and restrains the development of production and the national economy as a whole. The state budget deficit is a kind of “time bomb”, the explosion of which destroys the economic system through the unjustified emission of money and, as a result, hyperinflation. In addition, it places a heavy burden on future generations if financing loans are taken out abroad.
The second point of view - Keynesian - appeared during the global economic crisis of 1929 - 1933, when the growth of government loans was seen as a means of increasing the purchasing power of the nation, preventing crises and eliminating unemployment. Such loans become an important source of investment when other sources (for example, foreign investment, income from privatization) are absent or insignificant.
The third point of view is eclectic, based on the unification of heterogeneous principles and views. Some supporters of eclecticism argue that the growth of the budget deficit maintains a high level of interest rates even with a decrease in inflation rates, and also overestimates the exchange rate of the national currency in external markets. Others believe that a rise in the budget deficit will not necessarily lead to higher interest rates. They believe that the national debt implies that it will be covered through future taxes. And taxpayers' expectation that future tax increases will reduce their disposable income will lead to today's increase in savings as a protective measure aimed at maintaining a certain standard of living.
Considering all of the above, it can be argued that the formation of the state budget deficit is due, first of all, to the discrepancy between the state’s needs in financing its expenses and its capabilities. The state always lacks financial resources to perform its functions, which results in the formation of a budget deficit. Therefore, the state faces the problem of finding additional sources of funds, on the one hand, and using them effectively and efficiently, on the other. Traditionally, such sources for all countries are internal and external borrowings that form public debt.
The scheme for the formation of public debt can thus be presented as follows:
Figure 1. Formation of public debt
1.2 Economic content of public debt
In economic essence, public debt is the debt of government bodies, as a result of the formation of additional state resources aimed at resolving contradictions between the economic and social needs of society on the basis of loans from individuals, non-state sector institutions and foreign states.
However, this definition of the economic essence of public debt needs some clarification. The presence of public debt is a phenomenon that does not necessarily belong to the category of extraordinary, exceptional events. Quite the contrary, in the modern world there is not a single state that in its history has not faced the problem of growing debt. However, the sources of public debt, as mentioned above, can be different: on the one hand, growing public debt can be associated with large public investments in economic development, i.e. with state regulation of the economic situation, the desire to ensure progressive changes in the structure of social production through financing through government loans (it would also be advisable to include debts arising as a result of emergency circumstances - wars, natural disasters - when ordinary reserves become insufficient and it is necessary to resort to sources financing of a special kind), and on the other hand, significant public debt is very often a reflection of the general crisis and collapse of the economy, the ineffectiveness of financial and credit relations as a result of the government’s inability to keep the financial situation in the country under control.
To measure public debt, assess its impact on the economy, as well as the possibility of international comparison, in world practice there are a number of indicators and indicators of public debt.
One of the most commonly used indicators of total government debt is its percentage ratio to GDP.
Of particular importance are indicators based on the assessment of the costs of servicing and paying off internal and external debt. This, first of all, includes: 1) the public debt servicing ratio, defined as the ratio of the amount of debt repayment and interest payments in a given year (the volume of the current public debt) and GDP (the volume of exports of goods and services or the total amount of loans received by the state in the same year) , 2) the interest payment servicing ratio, defined as a percentage of total government spending (sometimes as a percentage of the amount of tax revenues to the budget or the volume of GDP).
The most commonly used indicators for measuring the burden of external debt are two indicators: a decrease in 1) the size of external debt or 2) the cost of servicing external debt in relation to the volume of exports of goods and services.
Many economists believe that the main burden of debt lies precisely in the need for servicing, i.e. deductions of interest payments arising as a result of public debt. When a certain level of payments for servicing the public debt in relation to GDP is reached, the state loses the opportunity for further economic growth. The limit of danger is considered to be an excess of the amount of debt compared to exports by 2 times, increased danger - by 3 times. The risk limit for interest payments is considered to be 15 - 20% in relation to exports, and the increased risk limit is 25 - 30%.
Public debt is a relatively new legal category and performs the following main functions:
1) Distribution function - allows you to redistribute monetary resources in accordance with the needs of the economy as a whole and the need to support any direction of socio-economic development.
2) Regulatory function - is expressed in the fact that the state, entering into debt relations, influences money circulation, the level of interest rates on the money market of capital, production and employment, and borrowers who are obliged to ensure the effective use of budget loans.
3) Control function - is implemented in monitoring the targeted and effective use of borrowed funds, compliance with the deadlines for their repayment and timely payment of interest.
2. Internal and external public debt
Why do many countries, including very developed ones, have external public debt? The weaker the domestic government securities market, the stronger the state’s dependence on external sources of restructured debt to the member countries of the Paris Club to cover the deficit. And since the currency of external loans is foreign, government debt in an emerging market country is denominated in foreign currency more than government debt in a mature market country.
Governments of emerging market countries often use external borrowing to solve pressing socio-economic problems. Such loans are similar to international economic assistance. Governments of developed countries resort to external loans to replenish foreign exchange reserves. Searching for external loans is an unenviable task for the government of a country where there is practically no government securities market.
External debt exists solely because of the government's desire to always be solvent and to have foreign exchange reserves to support the national currency in international markets. In fact, one can choose between domestic and external debt when there is an alternative - a liquid and well-functioning domestic government securities market. Then it makes sense to consider the following circumstances: 1) the impact of debt on the economy, 2) the cost of servicing the debt, and 3) the risk hidden in debt. The classics argued that there is no difference between internal and external debt; both reduce national wealth. From this point of view, there is no choice. According to the "new economists", there is a clear and significant difference between internal debt and external debt, and with regard to external debt the classics are right. The burden of external debt is shifted into the future because residents do not sacrifice anything (in pure form) at the time the debt arises. The burden is interest paid to non-residents from national income. Future generations will not receive the equivalent of these percentages. The repayment amount is also due to non-residents. This means that this amount of domestic resources goes abroad.
External debt of a state may indicate fiscal irresponsibility of the state. The impact of debt on the economy can be analyzed from two other points of view - Ricardian and traditional. From a Ricardian point of view, the real economy “doesn’t care” whether the deficit is covered by internal or external loans. The deficit does not affect investment and the balance of current accounts with foreign countries in the long term. In the traditional view, deficits have a strong negative impact on the real economy, especially on investment and the current account balance.
At a given rate of total savings, the deficit turns into fiscal crowding out. Given the rate of private savings and the problematic nature of domestic borrowing, it is also accompanied by a foreign trade deficit. In the standard paradigm, it matters whether the deficit is covered by internal or external borrowing. Domestic borrowing requires a well-functioning financial intermediation system. They then reduce inflationary pressure on the economy and the risk of a financial crisis involving foreign money. But with flexible interest rates, an increase in government domestic borrowing means a reduction in private domestic borrowing. If the exchange rate and interest rates are regulated by the state, then financial crowding out can develop into lending “on coupons”. So domestic borrowing is fraught with a shortage of investment and a loss of economic growth. External loans are attractive because they do not directly lead to fiscal crowding out and ease inflationary pressure on the economy. Moreover, they strengthen fiscal and monetary discipline in the country, since they deprive the government of incentives to increase inflation in order to reduce the debt burden. The next factor is cost and budget risk. The deficit needs to be financed, and all financing costs money. Money is needed to print money, collect taxes and pay interest to the government's creditors. Therefore, an important criterion for choosing between internal and external loans is the cost of debt servicing. If external debt is cheaper than domestic debt, then, other things being equal, it is necessary to borrow abroad. In reality, this “accompaniment” is not so direct. Much depends on the composition of government spending, the monetary policy of the central bank and the resulting interest rates and exchange rate of the national currency. In theoretical debates, the resources transferred from the private to the public sector through borrowing and the amounts due to lenders figure in constant prices. In the real world, divided into currency zones and countries with their national currencies, domestic debt is denominated in domestic currency, and external debt is denominated in foreign currency. Interest on external debt and the repayment amount are paid in foreign currency. If at the theoretical level you can forget about fluctuations in the exchange rate of the national currency, then when choosing practically between internal and external loans, you have to remember this. By transferring interest and the repayment amount from one currency to another, the state risks inflating the cost of servicing the entire debt, and with it the excessive tax burden. This risk, called foreign exchange risk, is another argument in favor of domestic borrowing.
3. The role of public debt
The two most important factors determining debt dynamics are the size of the budget balance and the size of real GDP. Depending on the state of these factors, two approaches to determining the role of public debt in a market economy can be roughly distinguished.
1. Classic approach. It consists of using government loans as a substitute for tax revenues. In the economy of modern states, this approach is associated with the attitude towards public debt as an instrument of stabilization macroeconomic policy. This approach is as follows.
In the phase of decreased business activity, budget revenues decrease. During this period, the government is interested in reducing the level of expenditures, so the question arises of compensating for the decrease in budget revenues. It is generally accepted that when business activity of business entities decreases, an increase in tax rates strengthens negative trends in the economy, therefore it is advisable to compensate for the decrease in budget revenues through government loans. Public debt thus becomes a substitute for tax revenues.
In the phase of increasing business activity, budget revenues increase, the volume of loans decreases or becomes negative (i.e., early repayment of debt occurs), due to which the relative size of the debt decreases to the original level.
However, there is a crucial point, the significance of which cannot be overestimated. The fact is that the government is faced with the problem of replenishing budget revenues in a phase of economic recession. It was during this period that the problem of the budget deficit worsened, and it would seem that public debt should play the role of a substitute for taxes. But practice shows that in such a situation, an increase in the volume of debt is undesirable, since an increase in government debt increases the risk of a debt crisis, and a kind of vicious circle is formed.
Thus, public debt can successfully fulfill the role of a macroeconomic stabilizer only under the condition of sustainable economic growth, which in turn consists of alternating periods of increase and decrease in the business activity of economic entities. During an economic downturn, it is advisable to reduce the size of public debt, since in this case public debt has a significant negative impact on both public finances and the economy as a whole.
So, the classic approach to determining the role of public debt in the economy is to use the latter as a substitute (substitute) for taxes and lies in the fact that the volume of government loans increases in the phase of decreasing business activity and decreases in the phase of its increase. In the phase of economic recession and in the period preceding it, the volume of loans minimizes or repays public debt ahead of schedule.
The disadvantage of this approach is the possibility of risk of erroneous planning of loan volumes. You need to know exactly how the phase of decline in business activity will end - a phase of revival or an economic recession. If the phase of declining business activity develops into a phase of economic recession, increasing the volume of loans leads to a mistake.
At the same time, the classical approach provides the government with the opportunity not to change the level of taxation or even slightly reduce it in the phase of declining business activity, but at the same time maintaining the level of government spending. This is the advantage of this approach.
2. Alternative approach. It is based on the exact opposite concept - in the phase of declining business activity, the volume of loans is reduced, in the phase of its increase, they are increased. During the economic downturn and the period preceding it, the volume of loans is minimized or the public debt is repaid ahead of schedule.
Within this approach, public debt thus plays the role of a financial mechanism that accelerates economic development. In the phase of increasing business activity, the government increases the volume of loans, thereby gaining the opportunity to direct additional monetary resources to finance projects that reduce the costs of economic activity and thereby increase the sustainability of economic growth. A growing economy, in turn, provides an increase in budget revenues, which will allow the government to meet its financial obligations.
The complete, seemingly paradoxical scheme has some advantages over the classical approach and, other things being equal, allows one to attract a large amount of monetary resources to the budget during the economic cycle. In addition, the decision on the optimal size of government loans is made not on the basis of forecast estimates of the phases of economic development, but on the basis of actual data on the pace of economic development: the economy entered a phase of increasing business activity - loans increased, a decline in business activity occurred - loans were reduced, economic recession - loans were minimized. This means that the risk of erroneous budget balance planning in this case is significantly lower.
Thus, having considered the concept, the essence of such a phenomenon as public debt, the causes and consequences of its formation, as well as the role in the development of the state’s economy, we can draw conclusions that the main reason and source of the formation of public debt is the presence of a state budget deficit, which in turn, is repaid using the mechanism of internal and external borrowing.
The role of public debt in the life of the state is quite ambiguous and is determined by its negative and positive consequences for the economy.
Ultimately, public debt can provide significant economic benefits and be a catalyst for economic development to some extent, but it requires responsible and professional management.
4. Public debt management
Let us now move to the government apparatus where debt managers work and try to understand why they are paid money. These people come into contact with debt on a daily and practical basis. They, like macroeconomists, “were sent by God... to solve practical problems, not to put forward and test elegant theories.” Some of them are macroeconomists themselves, because public debt management (GDM) is part of macroeconomic theory and policy. Some are portfolio managers because it is useful to look at PGM through the lens of modern portfolio theory.
So the word “practically” does not mean that UGD employees do not deal with theory. UGD is generally irrelevant as long as Ricardian equivalence holds. But it is necessary. The state must formulate the strategy and goals of the State Revenue Service, find means to achieve the goals and create bodies of the State Revenue Service, and also link the State Revenue Service with budgetary and monetary policies.
4.1 Debt strategy
The DG strategy (debt strategy) usually refers to a decision on the debt structure. A prudent and sustainable debt structure is critical for any sovereign nation. Behind the debt strategy is a seemingly simple idea. On the eve of the next financial year, the state has a debt and a need for borrowed funds, taking into account the need to refinance part of the debt. The question is, how to satisfy this need? The simplest strategy is a decision on the distribution of the annual need for borrowed funds among government securities. Thus, to implement the State Internal Borrowing Program, the Ministry of Finance decided to obtain funds by issuing long- and medium-term bonds. And GKOs will not be issued. Such a strategy can be called predetermined, since it is a simple rule that is known at the beginning of the next year and does not require taking into account changes this year. There are many predetermined strategies, and the state must be able to compare them with each other in relation to some fundamental goal.
The obvious approach is to choose the strategy that generates the minimum debt service costs. Estimating costs is complicated by the fact that the government issues mainly interest-bearing bonds, such as OFZ, and their suitability for implementing the strategy depends on future interest rates. Since the latter are unknown in advance, the maximum that can be done is to estimate the expected costs for the next financial plan. If the plan covers several years, then costs are averaged over the planning period. Variation in expected costs, often referred to in operational terms as risk, is also important. Let's say strategy X appears to be low-cost. But if the variation is high, then strategy X should be considered less desirable. How much less? So much more strategy X is inferior to other strategies in terms of variation. In some cases (those with a positive probability of “happening”), the budget will experience a shock because actual costs will be much higher than expected. Strategy X is risky if expected costs vary widely. The choice of strategy is further complicated by the fact that cost and risk are in antiphase, determined by the random evolution of the interest rate term structure (IRTS). The yield curve, which is a graphical representation of the HSPC, usually has a positive slope. This means that, per unit of time of their “life,” short government securities are less profitable (cost the state less) than long ones.
4.2 Theory of preferred habitat
It is worth recalling here the theory of preferred habitat, which explains why interest rates are sensitive to maturity. In addition to rate expectations, investors have clear time horizons (favorite “promise spots”) and demand a premium when investing for a period exceeding these horizons. Because the bond market is dominated by investors with short horizons, short rates are lower than long rates. Hence the positive slope of the yield curve.
There are two more circumstances that complicate the choice of strategy. Firstly, short-term debt is subject to refinancing in the near future, and long-term debt is subject to refinancing in the distant future. Secondly, the near side of the yield curve is more volatile than the far side, and the far side can become flat. The first reason is simple and clear, but in combination with the second it greatly confuses the matter: strategies that allow a significant amount of short-term borrowing generate lower expected costs, but greater variation (more risk) than strategies that allow a significant amount of long-term borrowing. In short, if there are strategies that can simultaneously reduce cost and risk, they are few. In practice, cost reduction becomes the goal of debt management, and risk becomes a constraint on achieving the goal. It follows that assessing the expected costs and the associated risk is not sufficient for choosing a strategy. We also need to assess the temporary diversification of loans. The main classes of government securities are bills and bonds with a fixed coupon. The first are issued for no more than a year, most likely in case of cash shortages, the second - for more than a year, most likely to finance the budget deficit. If the debt consists of only bills of exchange, then the budget is completely vulnerable to unpredictable fluctuations in the market price of the loan, since the bills are subject to refinancing in the next 12 months. And if the entire debt consists of bonds with a fixed coupon, then the budget is invulnerable to these fluctuations, since the bonds (on the day of issue) are not subject to refinancing in the next 12 months. The refinanced share of debt (RDD) or its inverse share of fixed coupon debt (FCD) serve as a measure of temporary diversification of loans. For example, a “standard” is established for DFK, reflecting the state’s cautious attitude towards loans. The DFK is then brought up to the “norm” by expanding or reducing the issue of bonds.
So, choosing a predetermined strategy, the state studies:
* expected debt servicing costs,
* cost variation (risk),
* temporary diversification of loans.
It was assumed above that to satisfy its annual need for borrowed funds, the state can use any combination of government securities. This is not entirely true, since not every strategy is permissible. In particular, the government cannot choose a strategy that ignores the fact that at some point on the yield curve there is an active government securities market. Why? Because “maximizing liquidity (and trading activity is a measure of liquidity. B.A.)... is tantamount to minimizing long-term interest expenses...”. The more liquid the market, the lower the transaction costs, the higher the demand for government securities and the lower the cost of debt servicing. A liquid market for low-cost financing gives the government financial flexibility and control over risk. The state can borrow as needed without paying a “penalty” for the suddenness of its appearance on the market. Moreover, a liquid market is necessary for the effective regulation of bank reserves within the framework of monetary policy and the maintenance of financial stability. Direct transactions and repo transactions of the central bank with government securities are the main instrument of monetary policy. If the market is not sufficiently liquid, then the central bank will not be able to use this instrument in a way that smoothly eliminates the deficit or excess of bank reserves. The result may be excess interest rate volatility and other undesirable effects. Finally, government securities are practically devoid of credit risk. Therefore, for private borrowers, the yield on government securities serves as the best ersatz of the yield on risk-free assets (“net interest”) and the reference point for the prices of their own bonds. Market participants use government securities for hedging and positioning for duration and volatility, as a means of managing liquidity, as an investment vehicle, collateral for cash loans, a basis for futures, and as a “safe haven” during financial turmoil.
The sensitivity of market interest rates to the volume of loans is also important for the state. The government's demand for borrowed funds is large enough that even a small change in strategy will affect rates. Let's assume that the rates are constant, but the volume varies from strategy to strategy. The state cannot claim a neutral market rate by concentrating all loans at one point on the yield curve or, conversely, reducing them to a minimum here. In the first case, the realized rate will be higher than the neutral one, in the second - lower. In short, since debt servicing costs are directly related to the volume of loans, at each point on the yield curve there is a volume interval where liquidity is maximum when supply equals demand.
4.3 Management objectives
Given the distorting effect of taxation, what goal should the government pursue in relation to the amount and structure of debt? The classic advice is to stabilize tax rates over time through borrowing. This is too academic a formulation for debt managers. For them, the need for a State Revenue Service stems from an obvious reality - the state cannot be left without money for a single day. Loans are needed when deficits are planned and in case of cash shortages. Borrowing, as we have seen, occurs when a surplus is planned and cash gaps are not expected. We need to refinance the debt. The influx of money into government coffers generates an outflow of money in the form of debt servicing costs, which vary with interest rates. And this variation is dangerous for the budget. Thus, the goals of public revenue management now have a common denominator - minimizing costs while taking into account risk.
Costs vary. Firstly, this is interest (listed in the budget item “Costs of servicing the public debt”). We will make do with income on interest-bearing government securities. These government securities have a nominal value, annual yield and frequency of interest payments. To calculate interest in each interest period, you need to multiply the face value by the yield and divide by the number of periods in the year. With a face value of $1,000, a 10 percent return, and two periods, the interest is $50.
Secondly, this is a discount and (partly) a premium. A discount is the positive difference between the par value and the placement price of a security. For the issuer, the discount is a capital loss. For example, if the denomination is 1000 rubles, and the paper is placed for 950 rubles, then the discount is 50 rubles. The issuer received less than 50 rubles. The premium is the negative difference between the par value and the placement price of a security. If the face value is 1000 rubles, and the paper is placed for 1050 rubles, then the premium is -50 rubles. In this case, the premium is the investor's capital loss and the issuer's capital gain. A premium is also called a premium to the price of a security purchased by the government for the purpose of early repayment. In this case, the premium is the investor's capital gain and the issuer's capital loss.
Discount and premium are common attributes of the issue and circulation of interest-bearing government securities. Whether the paper comes with a discount or premium depends largely on the price of the loan. When credit becomes more expensive, government securities can fall in price until a discount is formed. When credit becomes cheaper, government securities can rise in price until a premium is formed. Securities deprived of “official” interest can only be sold at a discount. That's why they are called discounted.
Third, it is the portion of the debt that is repaid in a given year, or the annual repayment amount (ASA). Like the discount and premium, the SHG does not figure in the budget (being a source of deficit financing), but if the repayment is associated with refinancing, then there is the possibility of an unexpected large and rapid rise in the cost of borrowings and even a refusal of investors to lend to the government. The state bears other costs for UGD. These are remuneration to agents, costs for production, examination, transportation and storage of government securities certificates, costs for maintaining government revenue authorities. In this case, these are professional market participants, mainly banks, assisting the state in the placement, circulation and servicing of government securities. In the future, by costs we will understand only those costs that connect public finances with the credit market. These are interest, discount, premium and SHG. Interest, discount and premium vary from loan to loan due to fluctuations in the market price of the loan and for SHGs they vary from year to year for the same reason. The remaining costs do not expose the budget to risk from the credit market; they can be considered fixed per loan and are not discussed further. Minimizing costs in itself is an unworthy activity, because costs can be minimized through default or money issue. True, investors will be scared, and debt will ultimately cost more. So default or money issue are far from the optimal choice. Minimizing costs is considered a worthy goal on the grounds that costs are ultimately taxes, the growth of which is accompanied by an increase in the dead weight of taxation (and even according to the “rule of the square”).
The state, which does not want to resort to default and other unworthy methods, uses VSPS, indexation, segmentation, information asymmetry and microstructural finance to minimize costs. Let us briefly characterize these ideological foundations of UGD. In many countries, the yield curve reflecting the VSPS is normal, that is, the yield of government securities tends to fall as the circulation period decreases. Consequently, by issuing more short-term government securities, it is possible to reduce the cost of debt, although the risk will increase. The cheapest, but also the most risky debt is government securities issued for a year or less.
It is important to understand why there is an opportunity to reduce costs. If there is no uncertainty, then the yield on a long-term bond is the average of current and future interest rates. This means that the term structure of debt is irrelevant to costs. The interest on a 10-year bond is the same as on a 5-year bond after you refinance it for another five years. But if there is uncertainty, then it is reasonable to assume that the term structure reflects investors' expectations of future rates. Investors understand that the longer they hold a security, the more they risk and, therefore, the greater the risk premium paid to them by the government. This premium is the excess over the yield that “represents” the risk-free yield or “net interest.” If the government refused to pay the risk premium, then investors would hold only the shortest and therefore almost risk-free government securities, for example, 3-month US Treasury bills. The risk premium “sits” in the yield of government securities. And it turns out: the longer the holding period, the higher the risk, the higher the risk premium, the higher the profitability and the lower the price of the security.
The next idea is to index debt by some measure of macroeconomic volatility such as GDP, government spending or the national currency exchange rate. More often, however, indexation is understood as linking the financial characteristics of government securities to the consumer price index in order to protect capital and investor income from inflation. Investors prefer government securities to have a higher rate when income is unexpectedly low, and a lower rate when they are unexpectedly high. This means that the cheapest government securities are those that cost the state (and with it taxpayers) more in times of unexpectedly low income. This also means that the state takes on the inflation risk, offering the investor such a means of protection for which he is willing to pay extra (accept a reduced return on investment). On one side of the scale is cost savings, on the other is inflation risk. Typically, weighing the pros and cons of indexation ends with the government agreeing to at least partially index the debt.
Another idea is to leverage information superiority over the private sector. In an imperfect market and/or information asymmetry (the government knows something that private agents do not), costs can be reduced without increasing risk if, for example, the assumption about interest rate expectations is not confirmed. The opportunity to save also arises when the government is better informed about the upcoming movement of rates than private agents, and therefore more confident than they are that some result can be achieved, for example, lower inflation. In this case, long nominal rates may appear "unfairly" high, and the government will want to increase short debt or issue indexed bonds until its policies gain market confidence and long rates fall to a "fair" level. The state can also act as an ordinary insider, that is, occupy an advantageous position in the market before the information known to it (say, about budgetary affairs) becomes common property. However, there are arguments against using information superiority over the private sector. First, officials may not have an accurate view of the likelihood of obtaining a particular outcome. The market is better able to judge the government's commitment to fighting inflation than the government itself. Secondly, if the state has privileged information, it will have to be made public as soon as possible to reassure investors. Finally, rational market participants will try to anticipate political changes and demand appropriate compensation from the government. Savings will shrink, if they survive at all. The government would be better off avoiding privileged information tricks if it wants to convince market participants that upcoming policy decisions are not related to the UGD.
But even if it abandons these tricks, the government may still believe that its unpredictable invasion of the market will allow it to reduce costs. Since the government is a major market participant, such intrusion may create uncertainty about the true price of debt. On the contrary, a predictable and transparent IGD may result in greater savings in the long term, since investors will demand less compensation from the government for the ambiguity of its issuance policy. Further, a consistent opportunity for cost reduction may exist if the market is segmented in some way. Let’s say that investors have their favorite “promise spots” on the market, and they are willing to pay extra to the state for the opportunity to occupy these spots. Debt consisting entirely of “individually tailored” securities would be the cheapest, since the profitability of each individual share would decrease by this very additional payment. But the “individualization” of debt would have the most serious consequences for market liquidity. By receiving additional payment from investors for a well-tailored debt, the state would pay them compensation for the insufficiently liquid market for government securities of “custom tailoring”.
Finally, debt can be made cheaper through microstructural innovations. The advantage of this approach is that the result does not depend on the type of government securities and is achieved without additional risk. The task here is twofold:
* increase overall market efficiency, that is, maximize
benefits from transactions;
* increase the state's share in this benefit. Microstructural finance teaches that market design affects prices and liquidity. For example, the market's ability to absorb large amounts of debt is limited by investors' reluctance to bear the risk associated with a large position in a security. Primary dealership overcomes this limitation. In exchange for some privileges from the state, primary dealers act as a wholesale base for government securities, holding them on their balance sheets until investors approach. A liquid secondary market also helps reduce costs by increasing demand for government securities, reducing transaction costs and risk.
Let's move on to risk now. Until now it has appeared in the most abstract form as a variation of expected costs. It's time to sort the risk "on the shelves" in order to separate those types of risk that are interesting to us from those that are not very interesting or not interesting at all (as we just did with costs). The state deals almost daily with the credit market, where it faces many different market risks. But even outside the market, the state cannot “relax.” In addition to market risk, there is non-market risk. Market risk is the likelihood of unpredictable and unfavorable changes in market prices, namely the price of credit and the exchange rate of the national currency. Regardless of what currency, national or foreign, the debt is denominated in, changes in the price of the loan affect the cost of servicing debt on new issues when refinancing at a fixed rate and when revising “floating” rates of return on government securities. Therefore, short debt at a fixed or floating rate is generally considered riskier than long debt at a fixed rate. Debt denominated in a foreign currency or indexed to an exchange rate also increases the volatility of servicing costs measured in domestic currency terms. Government securities with the right to return (put option) can lead to increased market risk and refinancing risk.
Next comes refinancing risk. This is the possibility of refinancing at an unusually high interest rate or lenders refusing to roll over the debt. To the extent that this risk is caused by the need to reschedule debt at a higher interest rate, it is a type of market risk. However, it is often considered a separate risk, in the belief that the inability to roll over the debt or an extreme increase in the cost of servicing it can lead to the emergence or aggravation of a debt crisis and thereby to real economic losses, in addition to the purely financial consequences of rising credit prices.
Next comes the two-faced liquidity risk. It refers to the costs or penalties that investors incur when trying to close a position due to a sharp decline in the number of bidders or a lack of sufficient market capacity. It is especially relevant when the UGD applies to liquid government assets or derivative instruments. At the same time, liquidity risk is the likelihood of a rapid reduction in liquid assets due to the government's unforeseen current monetary obligations or difficulties in quickly replenishing the treasury.
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Internal public debt is a set of credit and financial relations, thanks to which the state budget deficit is repaid and the volume of cash in circulation increases. Internal public debt arises due to the need to attract resources to implement orders, projects and state-level programs. Its maintenance is carried out by the Central Bank of the Russian Federation.
Features and control methods
Domestic public debt is the financial responsibility of a country that arises before individuals, enterprises, corporations, and commercial structures. Thus, in Russia it is expressed in the form of lending, the use of securities, loans and obligations that are guaranteed by the Government. In the Russian Federation, it includes: debts at the federal level, obligations to enterprises for which the country bears financial responsibility, as well as debts of municipalities to civilians. Among the main methods of managing public debt are:- conversion. In this case, the authorities decide to change the profitability of existing loans. Usually we are talking about reducing interest rates on them;
- consolidation. This procedure involves increasing the validity period of obligations that were previously issued. Conversion into longer-term debts is always beneficial to the state;
- unification. The method is used to combine loans that were previously issued. Typically, new loans are exchanged for bonds;
- default This is a radical measure used by a state that abandons previously assumed obligations;
- refinancing. This technique involves issuing new loans to pay off old debts.
Benefits and conditions for repayment
The state's internal debt is a stimulant for the circulation of cash within the country. By increasing domestic debt, the budget deficit is being paid off. Another advantage is that financial resources to cover the deficit are obtained in the domestic market, that is, there is no increase in the money supply.In order to pay the resulting debts in a timely manner, the state finances the securities market, influences its development, and enters international markets. The government passes laws that make it possible to attract large volumes of investment into the country. Government authorities use measures that help optimize federal costs.
Conclusion
A correct increase in domestic public debt does not pose a danger to the domestic economy. If such an instrument is managed rationally and effectively, the country will remain capable and stable. The government must borrow in the amounts needed to solve socio-economic problems. A transparent and consistent policy in this direction will allow us to gain trust among legal entities and individuals.13. Public debt: essence, types, forms of management.
Introduction
Chapter 2. Public debt of the Russian Federation and its impact on the functioning of the economy
Introduction
Most countries in the world, when carrying out economic transformations, turn to external and internal sources of financing. Rational use of loans helps accelerate economic development and solve socio-economic problems. However, the lack of a coherent state policy to attract and use both external and internal loans leads to the formation of public debt, which becomes a serious obstacle to economic transformation.
The problem of government loans is one of the most pressing problems in the Russian economy.
The size of public debt is important; one of the main issues is determining the level of influence of public debt on the functioning of the country's economy.
Public debt can have a positive and negative impact on the socio-economic processes of the country. Thus, under certain conditions, debt has a positive effect on economic growth. At the same time, it is necessary to precisely determine these conditions, which requires an adequate policy for managing public debt.
The unfavorable dynamics of public debt, caused by the huge costs of servicing it, forced many economists to engage in in-depth research and search for solutions to the problem that has arisen in the financial system of our country. Indeed, the outstanding public debt is one of the obstacles to the normal economic development of the country.
The purpose of the course work is to study the impact of public debt on the economy of the Russian Federation.
The purpose of the work defines the following tasks:
Reveal the essence of public debt and the reasons for its occurrence.
Consider the forms and types of public debt.
Consider public debt management.
Analyze the current state of the external and internal public debt of the Russian Federation and its impact on the economy.
Chapter 1. Economic content of public debt
1 The essence of public debt and the reasons for its occurrence
Public debt is understood as the result of financial borrowings by the state carried out to cover the budget deficit. The public debt is equal to the sum of the deficits of previous years, taking into account the deduction of budget surpluses.
The public debt of the Russian Federation includes debt obligations of the Russian Federation to individuals and legal entities, constituent entities of the Russian Federation, foreign states, international financial organizations, other subjects of international law, foreign individuals and legal entities arising as a result of government borrowings of the Russian Federation, as well as debt obligations under state guarantees provided by the Russian Federation, and debt obligations arising as a result of the adoption of legislative acts of the Russian Federation on the attribution of debt obligations of third parties to public debt.
According to current legislation, state and national debt should be distinguished. The latter concept is broader and includes the debt not only of the Government of the Russian Federation, but also of the governing bodies of the republics that are part of the Russian Federation and local authorities.
The national debt of the Russian Federation is fully secured by all federally owned property that makes up the state treasury. Despite the fact that the state's credit relations are provided by its treasury, the repayment of debt obligations and their servicing are carried out at the expense of federal budget revenues. The Budget Code of the Russian Federation instructs federal government bodies to use all powers to generate federal budget revenues in order to repay debt obligations and service the public debt of the Russian Federation.
Public debt is a direct consequence of the state's credit policy. Its composition depends on the forms of public credit that are used to attract temporarily free funds at the disposal of public authorities. According to Article 98 of the Budget Code of the Russian Federation, the volume of public debt of the Russian Federation includes only the amount of the principal debt on loans, the nominal amount of debt on government securities and the volume of obligations under guarantees issued by Russia. The payment of interest and non-interest income on government borrowings does not form part of the public debt, since according to the Budget Code of the Russian Federation they are an independent form of federal budget expenditures.
Public debt arises when government expenses begin to exceed its revenues, i.e., a budget deficit is formed which is covered by government borrowing.
The causes of public debt are:
emergency circumstances (wars, terrorist attacks, major natural disasters), when reserve funds are insufficient and the government has to resort to additional borrowing;
economic downturns that are caused by automatically achieved economic instability. That is, in an economic recession, national income decreases, which leads to a decrease in tax revenues and a budget deficit arises, which is repaid by government loans;
crisis phenomena in the economy - ineffectiveness of economic infrastructure, financial and credit relations, monetary, banking and fiscal policies. That is, in this case there is a need for structural restructuring of the economy. In such cases, urgent economic measures are required to stabilize the economy, which require large amounts of money;
large government investments in economic development. In this case, the budget deficit reflects active state regulation of the economy, the desire to ensure progressive changes in its structure;
socio-economic policy of the state. The main reason for large budget deficits is a decrease in tax revenues without adjusting government spending, as well as unsatisfactory organization of tax collection and payments (high costs of organizing tax collection, tax evasion);
social changes. For example, an increase in the proportion of elderly people in the population structure entails an increase in government spending on social security and health care.
2 Forms and types of public debt
In accordance with the legislation of the Russian Federation, the composition
government debt include:
credit agreements and contracts concluded on behalf of the Russian Federation, as a borrower, with credit organizations, foreign states and international financial organizations;
government loans carried out by issuing securities on behalf of the Russian Federation;
treaties and agreements on the receipt by the Russian Federation of budget loans and budget credits from budgets of other levels of the budget system of the Russian Federation;
agreements on the provision of state guarantees by the Russian Federation;
agreements and agreements concluded on behalf of the Russian Federation on the restructuring of debt obligations of the Russian Federation of previous years.
Types of public debt.
Depending on the duration and volume of obligations, public debt is divided into:
Capital public debt is the entire amount of the government's issued and outstanding debt obligations, including accrued interest that must be paid on those obligations.
Current public debt is the government's expenses to pay income to creditors and repay obligations that have come due.
Depending on the borrowing market and the currency of the obligations arising, public debt is divided into:
external public debt is loans raised from individuals and legal entities, foreign states, international financial organizations in foreign currency, for which debt obligations of the Russian Federation arise as a borrower or guarantor of loan repayment by other borrowers, expressed in foreign currency.
The internal debt of the Russian Federation is loans attracted from individuals and legal entities, foreign states, international financial organizations in the currency of the Russian Federation, for which debt obligations of the Russian Federation arise as a borrower or a guarantor of loan repayment by other borrowers, expressed in the currency of the Russian Federation.
The volume of external public debt includes:
the nominal amount of debt on government securities of the Russian Federation, the obligations for which are expressed in foreign currency;
the volume of principal debt on loans received by the Russian Federation and the obligations for which are expressed in foreign currency, including targeted foreign borrowings raised under state guarantees of the Russian Federation;
the volume of obligations under state guarantees of the Russian Federation, expressed in foreign currency.
The volume of domestic public debt includes:
the nominal amount of debt on government securities of the Russian Federation, the obligations for which are expressed in the currency of the Russian Federation;
the volume of principal debt on loans received by the Russian Federation and the obligations for which are expressed in the currency of the Russian Federation;
the volume of principal debt on budget loans received by the Russian Federation;
the volume of obligations under government guarantees expressed in the currency of the Russian Federation;
the volume of other (except for those indicated) debt obligations of the Russian Federation, payment of which in the currency of the Russian Federation is provided for by federal laws before the entry into force of this Code.
In some cases, an additional criterion for distinguishing public debt into external and internal may be the subject composition. The provision of credit funds to the state by residents indicates the formation of internal debt; borrowing funds from non-residents leads to the formation of external debt.
In terms of terms, government obligations can be:
short-term (up to 1 year);
medium-term (from 1 year to 5 years);
long-term (from 5 to 30 years).
Debt obligations are repaid within periods that are determined by the specific terms of the loan and cannot exceed 30 years. Changing the terms of a government loan issued for circulation, including the terms of payment and the amount of interest payments, the circulation period, is not allowed.
public debt national economy
1.3 Public debt management
The process of managing public debt is of particular importance for the implementation of effective financial policy in the field of public borrowing. Public debt management is understood as a set of financial measures of the state to use debt relations aimed at repaying debt obligations and creating favorable socio-economic conditions for the country's development; It is also one of the areas of the country’s fiscal policy, associated with the activities of the state in external and internal financial markets as a borrower and guarantor. Management involves attracting financial resources by placing securities or other sources, repaying and servicing debt obligations.
The ideal way to service and repay public debt is to repay it and interest on it in a timely manner. However, the state's intentions do not always coincide with real possibilities. Some unforeseen circumstances arise due to economic, social or political difficulties. There is a need to defer the payment of interest or principal, change the terms of the loan, and sometimes completely refuse payments. A clear sign of a debt crisis is a serious violation of the payment schedule. The state is forced to resort to various ways to regulate debt.
Activities that contribute to the repayment of public debt include:
repayment of external and internal loans;
providing guarantees;
changes in the terms of issued loans;
determining the conditions for the issue and placement of new government debt obligations, etc.
The implementation of these activities depends on making informed decisions in the process of managing public debt, which is based on an analysis of the volume and structure of the debt, an objective assessment of its current state. In this case, absolute and relative indicators are used.
Absolute indicators reflect the volume of government internal and external debt in monetary terms, the amount of expenses associated with its repayment and servicing.
The main relative indicators that significantly influence administrative decision-making and the choice of methods for managing public debt include:
percentage ratio of debt to GDP;
the share of expenses for repayment and servicing of public debt in the total amount of budget expenditures.
Public debt management is a continuous process that includes 3 stages:
at the first stage, the maximum amounts of government borrowing and guarantees for the next budget year are determined, tools for attracting resources and increasing the efficiency of their use are selected.
at the second stage, resources are attracted in external or internal financial markets by issuing and placing government securities, obtaining a loan or providing government guarantees, and then these funds are used to finance current budget expenditures or investment projects.
the third stage is to search for sources of financial resources to repay and service public debt, reduce overall costs, and timely fulfill debt obligations.
Methods of managing public debt can be divided into administrative and financial.
Administrative methods are based on the quick and precise implementation of individual orders of public authorities and management; they do not provide for an assessment of the economic efficiency and results of actions to manage public debt.
Financial methods consist in choosing methods and forms of ensuring the repayment of public debt through the analysis of financial indicators and are aimed at maximizing the effect of attracted loans with minimal costs associated with their repayment and servicing.
In a debt crisis, when the state is experiencing difficulties in fulfilling previously assumed obligations to repay and service public debt, the following tools are used:
refinancing - issuing new loans to cover previously issued debt obligations. There are three ways to refinance government debt:
)replacement of expired obligations with new ones, equivalent in amount to those being repaid;
)early replacement of some obligations with others with longer repayment periods;
)placement (sale) of new bonds and, using the proceeds, repayment of expired bonds.
loan conversion - the use of various mechanisms to ensure the replacement of public debt with other types of obligations that are less burdensome for the country's economy. The most common types of conversion are the exchange of debt for shares, the exchange of debt for goods, the repurchase of debt by the borrower on special terms, the conversion of debt into debt obligations of third countries, and others;
consolidation of loans - changing the validity period of previously issued loans;
Cancellation - waiver of all obligations under previously issued loans. But the use of this method leads to irreparable damage to the state’s reputation as a borrower;
debt restructuring - repayment of debt obligations while simultaneously borrowing (assuming other debt obligations).
Thus, public debt management directly affects economic growth, inflation, interest rates, employment, and the volume of investments in the country’s economy as a whole and in the real sector of the economy.
Chapter 2. Debt of the Russian Federation
1 Current state of the external debt of the Russian Federation
In recent years, thanks to the favorable conditions on the world commodity markets, as well as competent government policies in the monetary and fiscal spheres, the debt burden of the Russian Federation has decreased significantly. If previously debt payments tied up the entire economy of the country and were an unbearable burden for it, now, thanks to a flexible fiscal policy, they are not so burdensome; the government can afford to make early debt payments and spend on other sectors of the economy.
In absolute terms, the external public debt of the Russian Federation is one of the lowest in Europe. And in terms of relative indicators, it is one of the lowest in the world, amounting to only 2.5% of GDP. But such a favorable situation was not always observed. Thus, after the collapse of the USSR, the external debt of the Russian Federation steadily increased and reached its maximum immediately after the 1998 crisis, it reached 129 billion US dollars, which amounted to 146.4% of the country’s GDP. After this, starting in 2000, its rapid decline began, thanks to competent government policies and rising energy prices.
As of January 1, 2012, external public debt amounted to 35 billion 801.4 million dollars. USA, which is 10.4% less than at the beginning of last year. As of January 1, 2011, external public debt amounted to 39 billion 956.9 million US dollars.
The state of external public debt from 2000 to 2012 is presented in Table 1 (Appendix A).
But according to the federal law “On the federal budget for 2012 and for the planning period of 2013 and 2014,” the government will annually increase the amount of public debt to combat the budget deficit. Thus, by the end of 2012 it is planned to collect external loans of 7 billion US dollars, in 2013 they will increase to 8.3 billion US dollars, and in 2014 they will increase to 14.1 billion US dollars. According to the government, the growth of external debt will be within the “danger zone”, the debt burden should remain moderate and the borrowing policy reasonable, which will ultimately create conditions for growth in the private sector, ensure the investment attractiveness of the national economy, and preserve the country’s most important competitive advantages. However, the deputy chairman of the Public Council under the Ministry of Finance, Yevsey Gurvich, fears for the speed of growth of external debt. Especially if the level of budget deficit becomes chronic. “Then the debt problem will worsen,” says Gurvich. And this, according to him, will weaken macroeconomic stability, interest rates will begin to rise, debt servicing costs will increase, and economic growth will slow down. The main government budget expenses for which loans are required are, according to Gurvich, related to the military weapons program, expenses for the Olympics in Sochi and the APEC summit in Vladivostok.
The dynamics of external debt growth from 2012 to 2014 is shown in Figure 1 (Appendix A)
Today, the external debt of the Russian Federation consists of:
debts to the Paris Club;
debts to countries that are not members of the Paris Club;
debts to the CMEA countries (Council for Mutual Economic Assistance);
debts of international financial organizations;
commercial debt of the USSR;
market loans (Eurobonds);
providing guarantees to the Russian Federation in foreign currency.
Part of Russia’s internal debt, issued in foreign currency bonds of the Ministry of Finance (OVVZ), also circulates on the world market. They are often included in the volume of Russia's external debt, especially in studies by foreign economists.
The structure of external debt as of January 1, 2012 is presented in Table 2 (Appendix B)
2.2 The current state of the internal debt of the Russian Federation
The rapid repayment of external public debt in recent years is directly related to the increase in internal debt. Since the main source of repayment of external loans is internal government borrowing. Internal loans are less dangerous for the country's economy than external ones, since there is no leakage of goods and services abroad when repaying the internal debt. Therefore, today the bulk of the public debt of the Russian Federation is made up of internal loans - 84% of the total debt. So, as of January 1, 2012, domestic public debt amounted to 4.19 trillion. rub. which is 8% of the country's GDP. As of January 1, 2011, this figure was equal to 2.94 trillion. rub. Thus, the volume of domestic public debt increased by 1.25 trillion over the year. rub., or by 42.5%. Of the total amount, debt in government securities amounted to 3.55 trillion rubles. (an increase of 44% over the year), the volume of government guarantees is 0.64 trillion rubles. (35% increase).
The state of domestic public debt in the period from 2000 to 2012 is shown in Table 3 (Appendix B)
Domestic debt has been growing rapidly for the third year in a row due to the budget deficit, which is covered mainly by domestic borrowing. In 2009 it increased by 40%, in 2010 - also by 40%, in 2011 - by 42.5%. As a result, over the past three years, the total amount of domestic debt has almost tripled - from 1.5 trillion. rub. at the beginning of 2009 to 4.19 trillion. rub. at the beginning of 2012.
The Government of the Russian Federation has developed a new policy in the field of internal public debt for 2012-2014, aimed at:
ensuring a balanced federal budget while maintaining the high degree of debt sustainability achieved in recent years;
development of the national government securities market;
active use of the instrument for issuing state guarantees of the Russian Federation.
The key objectives in the field of government domestic borrowing will be to increase the liquidity of the market part of government domestic debt expressed in government securities and maintain profitability in the government securities market. The program of government domestic borrowings of the Russian Federation for 2012 -2014 was developed taking into account the possible demand for government securities from various categories of investors and provides for a significant positive balance of borrowings in the domestic market.
According to the federal law “On the federal budget for 2012 and for the planning period of 2013 and 2014,” domestic debt will continue to grow and by the end of 2014 it will increase 2.2 times. By the end of 2012 it should amount to 6.33 trillion. rubles, in 2013 7.87 trillion. rub., 2014 9.22 trillion. rub. which amounts to 14.5% of the country's GDP. The constantly growing domestic debt puts significant pressure on the Russian stock market, reducing the investment attractiveness of the country. However, if energy prices rise, borrowing plans may be reduced. This happened in 2011, during a budget surplus, the Ministry of Finance borrowed 300 billion rubles. less than expected.
The dynamics of growth of domestic public debt from 2012 to 2014 is presented in Figure 2 (Appendix B).
The current internal debt of the Russian Federation consists of:
government savings bonds with a fixed interest rate (GSO-FPS);
government savings bonds with a constant interest rate (GSO-PPS);
federal loan bonds with debt amortization (OFZ-AD);
federal loan bonds with constant income (OFZ-PD);
bonds of domestic bonded loans of the Russian Federation (OVOZ);
provision of guarantees of the Russian Federation in Russian currency.
The structure of domestic debt as of January 1, 2012 is presented in Table 4 (Appendix B).
3 The impact of the public debt of the Russian Federation on the national economy
Significant amounts of public debt have a significant impact on the country's economy. Among the problems of modern budget policy, the problem of public debt occupies a special place. It is one of the main problems of the Russian economy, having a direct impact both on the rate of economic growth of the country as a whole, and on the directions of financial and budget policy.
The impact of large public debt on the state of the economy is characterized by the following results:
interest payments on public debt require corresponding budget expenditures and cannot be reduced. The high level of such expenses affects the limitation of financing of other items of expenditure, primarily social ones;
Tax rates are raised to service the public debt. Only when the amount of taxes collected exceeds 20% of GDP is the government able to service its debts. This indicator coincides with the share of tax revenues in Russian gross income;
There is an increase in interest rates in the country. The state, forced to refinance a significant amount of debt, acts as a large borrower in the financial market, creating competition between issuers, which leads to an increase in interest rates on the loan;
it is possible to shift the debt burden onto future generations. It is very important for what purposes government loans were used. If they were spent on current consumption, instead of going on investments and modernization of production, the income from which would make it possible to pay off debts in the future, then the increase in debt and interest on it will lead to a decrease in growth rates and limit consumption in the future. In other words, if an increase in public debt is not accompanied by a corresponding increase in investment, then this leads to the fact that debt payments are shifted to the next generation, reducing the consumption of future taxpayers;
repayment of external debt leads to a drain of financial resources from the country, which reduces consumption and investment in the national economy;
income inequality is created, since the largest part of government obligations is concentrated among the wealthiest part of the population. As a result, the repayment of internal debt leads to the fact that funds received from the least protected segments of the population are transferred to the more affluent. As a result, whoever owns the bonds becomes even richer.
Russia's modern solvency reserves include: a positive current account balance, foreign investments, gold and foreign exchange reserves and debts of foreign countries to our country. There has been no improvement in virtually any of these positions over the past few years. Investments are growing, but extremely slowly. Debts are returned to us reluctantly (15-20% of what was planned). Russia's solvency, at least in the medium term, can only be ensured through the federal budget, which will remain the only available source of funds for repaying and servicing the debt.
Today, Russia's total debt is 178.8 billion US dollars, of which 16% are external loans, and 84% are internal. This predominance of internal debt over external debt is a consequence of deliberate government policy. Since domestic debt is a relationship between citizens of a given country, there is no direct loss of goods and services when it is repaid. External debt is repaid by selling goods to other countries. In order to pay off its external debt, a country must reduce imports and increase exports of goods, with export proceeds being used not for development purposes but for repaying the debt, which slows down the rate of growth and thereby reduces living standards. And as long as external debt continues to exist in Russia, our economy will not be able to fully develop due to constant leaks of funds abroad.
Conclusion
Currently, budget deficits have become a common occurrence for the state budget of most countries. Recently, the federal budget of the Russian Federation has also become deficit. The budget deficit may be a consequence of unfavorable economic conditions or the result of a deliberately pursued budget policy.
There are various ways to finance a budget deficit. If it is carried out through the issue of money, then this leads to an increase in the amount of money in circulation, rising prices and inflation. Covering the deficit by borrowing from the private sector leads to a reduction in private investment through the issuance of government securities.
The budget deficit is inextricably linked with the concept of public debt, which, depending on the sources of the loan, can be internal and external. Significant government debt negatively affects the economy: it leads to increased stratification of society, negatively affects the rate of economic growth, and the cost of servicing government debt increases the budget deficit. External public debt is repaid using export earnings, which can also negatively affect the pace of economic development.
The most important legislatively established measures for managing public debt include establishing maximum volumes of public internal and external debt, limits on external borrowing; sources of internal financing of the budget deficit, including proceeds from the issue of government securities; maximum amount of external borrowings; expenses for servicing government internal and external debt; upper limits of state internal and external guarantees.
The current economic state of the Russian Federation is characterized by a deficit budget. The main share of sources of financing the budget deficit comes from domestic financing. As a result, the Reserve Fund, which is used as one of the main sources of financing the federal budget deficit, is greatly depleted.
In addition, the amount of public debt, both internal and external, is constantly increasing. In the future, a further increase in debt, especially domestic debt, is expected.
Based on all this, we can conclude that these phenomena have an adverse impact on the development of the country as a whole. Therefore, the government needs to develop and implement special programs both to reduce the budget deficit and to reduce internal and external debt. Only taking effective measures in these directions will contribute to the socio-economic development of Russia.
List of used literature
1. Budget Code of the Russian Federation dated July 31, 1998 No. 145-FZ (as amended on June 27, 2011).
Federal Law “On the Federal Budget for 2012 and for the planning period of 2013 and 2014” dated November 30. 2011 No. 371 -FZ.
Anisimov A.S. Russian government debt. M.: Economics, 2000. 350 p.
Alekhin B.I. Government debt. M.: Unity-Dana, 2007. 336 p.
Borisov S. M. External debts of Russia. Money and Credit, 2010. No. 2. 24 - 29 p.
Babich A.M., Pavlova L.N. State and municipal finance: Textbook for universities. M.: UNITY, 2002. 687 p.
Braginskaya L.S. Government debt. Analysis of the management system and assessment of its effectiveness. M.: University Book, 2007. 10-55 p.
Vavilov Yu.Ya. National debt: A textbook for universities. Ed. 3rd, revised and additional M.: Perspective, 2008. 256 p.
Voronin Yu., Kabashkin, V. Public debt management. Economist. 2006. - No. 1. pp. 58 - 67.
Vorozhtsov P. O. On the principles of Russian policy in the field of public debt management Securities market. - 2005. - No. 18.
Danilov Yu.A. Government debt markets: global trends and Russian practice. M.: MAKS Press, 2008. 432 p.
Dadashev A.Z., Chernik D.G. Financial system of Russia: Textbook. allowance. M.: INFRA-M, 2006. 248 p.
Kozikova E.N. State external debt. Functioning in the economy of the borrowing country. M.: MAKS Press, 2004. 210 p.
Matskulyak I.D. State and municipal finances. M.RAGS, 2007. 640 p.
Shabalin A. Dynamics of state and corporate debt. The Economist, 2010. No. 3. 50-57s.
16.<#"justify">Appendix A
Refinancing- repayment of old government debt by issuing new loans.
Conversion- a change in the size of the loan's profitability, for example, a decrease or increase in the interest rate of income paid by the state to its creditors.
Consolidation- increasing the validity period of already issued loans.
Unification- combining several loans into one.
Deferment of loan repayment is carried out in conditions where further active development of operations to issue new loans is not effective for the state.
Debt cancellation- refusal of the state from debt obligations.
Debt restructuring- repayment of debt obligations with simultaneous borrowing (assuming other debt obligations) in the amount of repaid debt obligations with the establishment of other conditions for servicing debt obligations and the timing of their repayment. The Budget Code of the Russian Federation states that debt restructuring can be carried out with a partial write-off (reduction) of the principal amount.
National debt– these are issued and not repaid obligations of government bodies.
Classification of debt according to various criteria:
1)Depending on the extent of coverage of the totality of obligations:
Principal debt (the entire amount of government debt that is not due and cannot be presented for payment during a given period)
Current debt (state debt for obligations for which payment has become due)
2) according to the form of obligations:
Loan raised on behalf of the Russian Federation
State securities of the Russian Federation
Budget loan of the Russian Federation - state guarantee of the Russian Federation
3) depending on the borrowing market, type of lender and borrowing currency:
Domestic (debt in Russian currency)
External (debt in foreign currency)
4) by type of borrower:- debt of the Russian Federation - debt of the constituent entities of the Russian Federation - municipal debt
5) according to urgency:- short-term (less than 1 year)
Medium-term (from 1 to 5 years)
Long-term (from 5 to 30 years inclusive)
The existence of public debt also implies the need to manage it. Public debt management refers to the totality of actions of the state represented by its authorized bodies to regulate the size, structure and cost of servicing public debt.
The growth of public debt entails many negative consequences:
1.the existence of external debt implies the transfer of part of the product created within the country abroad
2. entails a decrease in the standard of living of the population
3. increasing tax rates, as a means of paying off government internal debt, can undermine the effects of economic incentives for production development
Sources of repayment of government debt : state budget revenues and reserve fund funds.
Supreme authority for public debt management - Federal Assembly. It establishes the most important parameters within the framework of the federal law on the federal budget public debt: maximum amounts of internal and external public debt; maximum volume of annual external borrowings; expenses for servicing public debt in the current year
The process is of particular importance public debt management– a set of measures by the state to accept, regulate and repay financial borrowings. It is carried out at the level of the Russian Federation - by the Government of the Russian Federation, in the constituent entities - by executive authorities, in municipal associations - by local government bodies.
Methods of public debt management :
1) restructuring - repayment of debt obligations = simultaneous borrowing in the same amount of other debt obligations with the establishment of other conditions for servicing government debt (interest payment, debt amount, repayment period);
2) obtaining a technical loan - the lender provides a new loan used to pay off old debt;
3) extension of the loan agreement - extension of the term of the loan agreement;
4) consolidation - combining various debt obligations and replacing them with another debt obligation;
5) convention – maintaining the level of profitability of debt obligations;
6) determination of the maximum amount of annual borrowings.
3 Public debt management
1 Current state of external public debt of the Russian Federation
2 Current state of the internal public debt of the Russian Federation
Conclusion
References
Appendix A
Appendix B
Appendix B
Appendix D
