A public debt: its essence, impact on economy and redemption possibilities

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A public debt: its essence, impact on economy and redemption possibilities

Journal Title: Економічний вісник університету - Year 2016, Vol 1, Issue 29

Abstract

An essence of public debt is reviewed in this article along with its impacts (good and bad) on economy and society of borrowing countries. Evolution of main indicators of public debt in certain countries is analyzed in this article. Authors also review public loan's redemption possibilities. Governments had to attract free capital of other business entities and citizens to satisfy various public needs and to cover its expenditures. Public debt together with taxes Financial climate of any country, its development possibilities are defined by such indicators as public budget, deficit and, of course public debt, which is an aggregate indicator of both budget and deficit. Nowadays this problem becomes more and more important in the view of global economic crisis. A purpose of this research is to define essence and economic impacts of public debt and its redemption possibilities. The following tasks were set to reach these goals: to specify economic essence of public debt, to show pros and cons of public debt for social and economic activities; to analyze certain countries' public debt's evolution; to review its redemption possibilities. The economic point of view is that «A public debt is a system of monetary relations that cause redistribution of free capital of residents, non-residents, foreign countries and international monetary funds that transfer to debts aiming at public needs' satisfaction». Nowadays public debt's increase is reviewed as a condition of economic growth. A public debt provides government's ability to solve social-economic problems. A public debt can have positive or negative impact on the country. The amount of the public debt can be analyzed together with the other indicators, such as GDP, for example. This indicator show an ability to cover the debt with the output produced in the country for a period. The main point is that a growth rate of the GDP should be higher than a growth rate of GDP. A public debt is a normal thing for modern countries according to world public borrowing practice. Nevertheless it shows a difference between country's economic potential and society's needs. The amount of a public debt of modern countries increases annually, and nowadays full redemption of this debt is unreal grace to its size, so it becomes virtual. That's why many country-borrowers try not to become bad debtors. Their main method is to mobilize their efforts to internal economic growth, namely to cut budgetary expenditures, to rationalize import, to diverse economic potential, to improve efficiency of external borrowing, etc. At the same time we must admit that mutual obligations of different countries are stimulating economic growth and enlarge international cooperation.

Authors and Affiliations

Olga Gulyaeva, Viktoriia Umanska

Keywords

public debt; GNP; budget deficit; social-economic impact of public debt

EP ID EP176798
DOI -
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