Issues related to public debt management are among the most important in the economic policy of Russia. And this is due to the fact that in recent years there has been an increase in public debt, as well as the cost of paying it off. Hence the main goal of management: reducing debt and reducing the cost of its repayment. That's just not all as simple as it might seem at first glance. The management of domestic public debt, as well as external, has features that are related to the nature of relations with creditors, debt settlement, routine servicing and the restriction in choosing debt settlement methods. In this regard, it is worth getting to know what methods of public debt management are.
Public Debt Management Methods
· Refinancing - repayment of part of the main debt (or all in full), as well as interest on it from those funds that were received from the placement of new loans.
· Cancellation (default) - the state refuses to pay the debt and its interest on previously issued loans.
· Conversion - a decision by the state to change the yield of previously issued loans. To achieve this, the state usually reduces the amount of interest payments.
· Novation - agreements between the borrower and the lender on the termination of obligations, as well as replacing them with other obligations that provide other conditions for paying off debts.
· Unification - a decision by the state to combine several previously issued loans when bonds of previously issued loans are exchanged for bonds of new loans.
· Consolidation - extension of validity for previously issued obligations. The state is always interested in obtaining loans for longer periods.
· Deferred repayment of a loan (or all loans issued in advance) - is carried out in the case when the further issue of new loans does not carry financial activity for the state.
Public debt management practices such as conversion, unification and consolidation of government hiring are most often applied to domestic loans. As for the delay in repayment of the loan, a similar measure can be applied to external loans.
Principles of Public Debt Management
Public debt management methods were created in order to solve the following problems:
· Keep the volume of internal and external public debt at the same level. This is necessary in order to maintain the economic security of the country, as well as to ensure that the authorities fulfill the obligations that they have undertaken, while significant damage to the financing of socio-economic development should not be caused.
· Minimize the cost of debt by lengthening the debt period and reducing the income of government securities.
· Preserve the state's reputation as a good borrower by continuously fulfilling all obligations to investors.
· Maintain stability and predictability of public debt.
· Achieve the most efficient and rational use of borrowed funds.
· Coordinate the actions of bodies of constituent entities of the Russian Federation, local government and federal bodies in the country's debt market.
· Diversify debt obligations by loan terms, forms of payment and other parameters in order to satisfy the needs of investors.
The main problems of public debt management
· At the moment, the debt problem is not yet fully resolved. In particular, this concerns the obligations of the Russian Federation on state guarantees presented by it.
· Requires regulatory regulation of public debt.
· There are no legislatively fixed norms for determining the volume of state external debt that comply with international standards