A Cross Country Analysis Of Public Debt Management Essay

977 WordsJul 11, 20154 Pages
PUBLIC DEBT A Cross-Country Analysis of Public Debt Management Strategies* Martin Melecky: Banking and Debt Management Department World Bank In order to finance expenditures on public goods and services that promote growth and increase nations welfare governments often have to borrow this decision of how much to borrow is that of fiscal policy which determines the targeted level of debt based on a sustainability analysis of government debt. The main cause for the increasing domestic debt and its utilization to finance revenue deficit, is the rigidity and the restricted scope for further expansion of the tax receipts and low nontax revenue to meet the growing non-developmental expenditure. This rise in non-developmental expenditure is attributed to interest payments and defense expenditure, accounting for nearly one-third of total expenditure. It is essential to understand the composition of domestic debt, an important feature of fiscal policy. Internal debt, small savings, provident funds, and reserve funds and deposits are the main constituents. With respect to India, internal debt of the central Government is secured under the Consolidated Fund of India and that of the States in the case of the State Governments. The structure of domestic debt has been fluctuating over time in India and the share of internal debt in domestic debt has been declining, but it still accounts for more than half of domestic debt. In India, external debt can only be incurred by the Central
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