Methods of managing public debt
Issues related to public administrationdebt, are among the most important in Russia's economic policy. And this is due to the fact that in recent years there has been an increase in the public debt, as well as the costs of its repayment. Hence the main goal of management: reducing debt and reducing the cost of its repayment. But not everything is as simple as it might seem at first glance. Management of domestic public debt, as well as external, has features that are related to the nature of relations with creditors, debt settlement, current service and with a limited choice of ways to settle the debt. In this regard, it is worth getting acquainted with the kind of methods that are used to manage public debt.
Methods of managing public debt
· Refinancing - repayment of part of the main debt (or entirely), as well as interest on it from the funds that were received from the placement of new loans.
· Cancellation (default) - the state refuses to pay the debt and its interest on loans issued earlier.
· Conversion - the decision of the state to change the profitability of previously issued loans. To achieve this, the state usually reduces the amount of interest payments.
· Novation - agreements between the borrower and the creditor on the termination of obligations, as well as replacing them with other obligations that provide for other terms for the repayment of debts.
· Unification - the decision by the state to combine several previously issued loans, when there is an exchange of bonds of previously issued loans for new loan bonds.
· Consolidation - increase in the validity period for previously issued obligations. The state is always interested in getting loans for longer terms.
· The deferral of loan repayment (or all loans issued beforehand) is carried out when further issuance of new loans does not bring financial activity to the state.
Such methods of public debt management,as conversion, unification and consolidation of state hiring are most often carried out with respect to domestic loans. As for the postponement of repayment of the loan, this measure can be applied for external loans.
Principles of public debt management
Methods of managing public debt were created in order to solve the following problems:
· Maintain volumes of internal and externalpublic debt on one level. This is necessary in order to preserve the economic security of the country, as well as to ensure that the bodies fulfill their obligations, which they assumed, without causing significant damage to the financing of social and economic development.
· Minimize the cost of debt by extending the debt period and reducing the income of government securities.
· To preserve the reputation of a good borrower from the state through continuous fulfillment of all obligations to investors.
· Maintain stability and predictability of public debt.
· To achieve the most effective and rational use of borrowed funds.
· Coordinate the actions of the bodies of the subjects of the Russian Federation, local self-government and federal bodies on the country's debt market.
· Diversify debt obligations in terms of borrowing terms, forms of payment and other parameters in order to meet the needs of investors.
The main problems of public debt management
· At the moment the problem of debt is not yet fully resolved. In particular, this concerns the obligations of the Russian Federation on the state guarantees it has shown.
· The regulatory regulation of public debt needs to be improved.
· There are no legislatively fixed norms for determining the volume of the state external debt, which meet international standards.