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Public Finance - Managing Public Debt
Public Finance - Managing Public Debt
Introduction Causes for Public borrowing Types of Debt Methods of Public debt Redemption Role of the Various Agencies managing public debt Recent Scenario of public debt Solution to managing the public debt
Introduction
In this world nothing can be said to be certain, except Death & Tax
Government lending significant amounts of capital funds to the private sector for investment in planned development projects
Internal Debt
1. Market Loan The maturity period of 12 months or more. 2. Bonds
National Rural Development Bonds(NRDB) and Central Investment Bonds. Maturity 3 to 10 years. 3. Treasury Bills Purchased by commercial banks and others. Period of 91 day and 364 day. 4. Special Floating and Other Loans.
6 5. Special securities issued by RBI. Loans for a period of maximum 12 months from RBI. 6. Ways and Mean Advances. Loans for a period of three months from RBI.
External Debt
A. Long term debt
World bank, International Monetary fund, AsianDevelopment Bank(ADB) B. Short term debt
Refunding Conversion Surplus Budget Sinking fund Terminal Additional Taxes Capital levy Surplus balance of payments
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Improving Efficiency of the economy and overall growth To use public policy instruments to improve equity RBI is the largest single holder of central government securities Prevent the government from borrowing from other sources at a higher rate of interest. Impose credit control on time to time Keep the SLR, CRR ratios at reasonable level. Regulates the banking structure through imposition of liquidity restrictions regarding credit supply.
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Determining the specific borrowing instruments Designing the medium-term public debt management strategy within which the daily management public debt portfolio and its risk will be managed. Negotiates the loan agreements, agreements related to the transactions on derivative products and other related documents Collaboration with other relevant Agencies, collects, processes on borrowing and public debt operations
Recent Scenario
Years 2005 2006 2007 2008 2009 2010 2011
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Public debt (in % GDP) 59.7 53.8 52.8 61.3 57.3 55.9 48.5
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Reduction in subsidies.
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3. Raising efficiency of borrowing Programs of Central Govt.
The RBI has played a major role in improving the efficiency of borrowing programmers of the Central Government
state government loans continue to be on old pattern and procedures Foreign Institutional Investors have been permitted to invest in government debt.
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6. Consolidated Sinking Fund (CSF)
The CSF has the objective of breaking the vicious cycle of rise in repayment, burden of public debt
Disinvestment will enable the government to raise funds, which can be utilized to repay a part of the public debt
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Thank you