The public debt is the sum of previous state expenditures or budget deficits?
All people are familiar with the concept of property debt: loans in banks, installments in stores, etc.
And who has the state and why? Is it profitable to lend to the government? What does the term "public debt" mean? Is this the amount of prior loans or expenses? We will try to understand this further.
The concept of a budget
The public debt is the sum of the preceding budget deficits.
This is one of the definitions. The key concept in it is the budget. This is the sum of all expenditures and revenues of the state. The sources of its replenishment are:
- Direct taxes: personal income tax, profit, unified agricultural, etc.
- Indirect - excise duties for the purchase of variousgoods: cigarettes, alcohol products, foreign cars. Tomorrow the list can be replenished with various sodas, energy drinks, chips, as the authorities at the higher levels are discussing it.
- Licensing fees.
- Penalties, fines, etc.
Types of budget
This money falls into the state budget, and then, depending on the amount, internal and external expenses are planned.
From the success of the current policy, the budget can be:
- The surplus - income more costs.
- Balanced - equal indicators.
- Deficient - income less expenses.
It is considered that the balanced budget is considered ideal, which speaks about the balanced policy of the state and competent management.
The reasons for the budget deficit
Hence the concept of public debt arises - this is the sum of the preceding expenditures, which were higher than revenues.The reasons for this can be different:
- Change in market situations, for example, the fall of oil in half.
- The change of power in the country, and, as a consequence, illiterate financial management.
- Increase in financial social obligations, related, for example, to a sharp demographic boom in the population, etc.
As we have already said, the public debt isthe amount of previous budget deficits. But it can increase and the forthcoming expenses. What does it mean? The budget of the country is planned for the next years very long. In Russia it is adopted for several years. The government already knows today how much it should spend tomorrow: pensions, state employees' salaries, state orders, etc.
This means that today's national debt- this is the amount of previous public expenditure, which should be higher than the income for the previous time. We must not forget that, for certain reasons, it can grow in the coming years. To understand all the mechanisms, how the state balances in this situation, we turn to the concept of "federal loan bonds" (OFZ). More on this further.
Federal loan bonds (OFZ)
Bonds of the federal loan are securities,which are listed on the Moscow Stock Exchange. In fact, these are the receipts that the government issues at a certain percentage. In the course of various procedures, they enter the exchange, where through the intermediation of traders and stock brokers, any investor can acquire them. The goal is to increase capital with minimal risks under state guarantees. Of course, it can also deceive those who lived in 1998, they know such a thing as default - a refusal to pay their obligations. Despite this, the authorities are trusted more than commercial enterprises, which may turn out to be bankrupt any day.
Bonds of the federal loan areoriginal receipts to the bearer. For their honesty watches the exchange. Investors today are buying debts, for which after a certain time you can get income. There are OFZ, for which payments should be made in 20-30 years. Their owners, as a rule, receive annual bonuses (coupons).
We have already said above that the public debt -this is the amount of prior expenses. But where do the money come from? Who occupies the state? One of the sources is OFZ. That is, the budget has already been planned for payment of obligations for the following years, but its forecasts have worsened. In this case, the Finance Ministry attempts to prolong the issuer's rights with the help of the Central Bank, that is, to postpone payment of debts. It offers more favorable coupons (interest) on bonds and raises their nominal value (the amount shown for liabilities at the end of the billing period).
So, public debt is the sum of previous budget deficits.
Types of public debt
Depending on the sources of money loans, the public debt is divided into:
Internal is formed due to OFZ sales on the Moscow stock exchange.About what bonds are, we already said. External debt can be formed from different sources. The main ones are:
- The International Monetary Fund is the largest creditor of the states on the planet. The organization was created by private sponsors, but actively cooperates with the UN and the European Union.
- International banks.
- Other states.
- Bonds on international trading floors.
Any public debt in foreign currencyis automatically considered external, as the authorities and the Central Bank of Russia can not cut it down by various financial instruments: devaluation, inflation, denomination, etc.
The public debt of Russia today
We have already said that the national debt is the sum of the previous budget deficits, but what is its amount today.
As of October 2015, the Government of Russia should spend 7.4 trillion rubles on domestic debt, and by mid-2016 this amount has increased to 7.9 trillion rubles.
The external debt is $ 7 billion, whichis negligible, compared with the country's GDP. However, the authorities announced active borrowing of funds on international exchanges, as well as in the domestic market.
For example, the US debt is $ 19 trillion. The amount seems to be impressive, but it is 109% of the country's GDP. If Russia had such a debt, then, given the macroeconomic indicators, we would pay it for several generations.
There will be no default?
Before asserting about the default of a particular country, it is necessary to correlate the country's GDP level, the amount of debt and servicing on it.
The situation in the Russian market is exacerbated by debtslarge corporations. Formally, these figures are not included in the state budget debt, but in fact the authorities are sponsoring these enterprises, and many of them directly affect our well-being. At the beginning of 2016, corporate debt was $ 599 billion, which is much more than $ 7 billion. Given the sectoral sanctions of the West, one can say that these companies can not now be lent to foreign banks, and therefore, to refinance, postpone their debts. If the situation does not change in the near future, then companies will default one by one. This will lead to a deterioration in the rating of confidence in the country, since no one else will want to invest in businesses that may simply disappear.