State and municipal credit. Public Debt Management

The development of financial relations and the adjustment of the functional purpose of the state in the economic sphere lead to changes in the methods and forms of public administration and regulation. The budget of the modern state, as a system of relations and as a single fund of state funds, uses all available methods and forms to equalize the balance between income and expenditure. One of such methods of accumulating money in the revenue side of the state budget, a source of financing of public expenditures is state loans (loans).

State credit (in the broadest sense of the word) is a combination of economic monetary relations arising in the process of redistribution of free cash, the formation of the funds of the centralized money fund of the state on terms of urgency, pay and repayment, and its use with the purpose of realizing the functions of state administration.

A state loan is a combination of relations, where one of the parties is the state, and the other party – creditors or borrowers – are other states, organizations and citizens. The basis of such relations is, on the one hand, the withdrawal of free monetary relations (their redistribution) on terms of urgency, pay and repayment, and on the other hand, the provision of financial assistance or the financing of public expenditure.

The need to use the system of public credit (loans) is due to the uneven economic development of the economy and credit in general. The possibility of using state credit is also conditioned by the existence of money, by the performance of such functions as the accumulation and preservation of value. As a rule, under the conditions of economic growth, the role of public credit falls and the role of government loans falls, and in a recession, the role of public credit increases, and state loans fall. Thus, different aspects of the financial method of regulating the economy-financial policy in the field of state lending-are manifested.

State credit (in the narrow sense of the word) is a combination of economic monetary relations that arise between the state and other states, organizations, citizens regarding the withdrawal of free cash on terms of urgency, pay and repayment in order to achieve a balance between revenues and expenditures of the state budget for implementation state of its functions and obligations.

In the event that the state acts in such relations as a creditor, such transactions show the active functional purpose of public credit. The main form of manifestation of such operations may be the volumes of budget loans, treasury loans, etc. Such a manifestation of a state loan is positive, as the state’s revenues from financial transactions increase.

When the state acts as a borrower of means – the passive role of the state credit is shown. The main manifestation of such relations is the growth in the volume of state loans. The whole aggregate of state loans characterizes the size of the state debt.

However, state credit, which is a financial category, can not be attributed, by virtue of its essential characteristics, to the traditional concept of bank credit.

Bank loan, as a rule, is covered at the expense of productive use of money resources and profit earning. In the case of a loan to the state, the purpose of the loan is to attract additional sources to cover state budget expenditures, which, as a rule, are unproductive (social, military and other expenses). The source of coverage of loans and interest on them are state budget funds. Moreover, these funds are used from future budget funds received, in particular, from the amount of taxes. The number of taxpayers and creditors of the state, as a rule, does not coincide.

In the process of bank lending, a system of available support measures is used, which is developed on the basis of current economic conditions. State loans, as a rule, either do not have collateral, or have gold collateral (when borrowed internally) or provide property (with external borrowing). In conditions of borrowing from citizens, the state credit provides for a significant role of attractive measures designed to outwardly show the effectiveness of investments for creditors.

A bank loan is a means of redistributing funds within a limited range in order to increase the profit (income) of specific entrepreneurial structures. In the context of state regulation of the economy, the whole range of forms of its attractiveness is used in the process of raising funds to the state budget funds, but less in terms of, for example, preferential taxation, income stability, coercion, etc. The state credit expresses the redistribution relations within the economic system and based on the use of state regulation. It is in the process of paying interest and dividends that this redistributive nature of relations manifests itself.

Concepts of state credit and state loans in economic literature are treated as synonyms. However, one should keep in mind their some differences from each other. State credit is a broader concept than a government loan. The state loan includes economic monetary relations with respect to the mobilization and use of funds through the conclusion of loan agreements and loan agreements.

State loan combines only a system of economic monetary relations in accordance with the requirements of loan contracts – directly: the terms of the loan agreements themselves and the terms of granting state guarantees.

State loans are classified according to the following characteristics:

• By the degree of centralization of borrowed funds (borrower):
  • federal;
  • Subjects of the Federation;

local governments (municipal loans).

• Placement: internal and external.
• By placement method: traded on the market and non-convertible.
• By maturity: short-term, medium-term, long-term.
• In terms of security: secured and not secured by property.
• In terms of income: interest (with a discount, no discount), interest-free, zero-coupon, with a coupon (zero, solid income, floating income).

The public debt is a value less than the state loan. The state loan includes two large parts: a loan (loan) issued and a loan (loan) received. The public debt includes only the loan (loan) received.

Public debt in addition to loans (loans) includes amounts of debt to business entities and interest on it. The size of the state loan (loan) does not take into account the amount of debt and interest on it, since these amounts do not meet the requirements for the loan and loans as such.

The state debt can be attributed, on the basis of external signs of manifestation and economic essence, all debts of economic entities to each other.

In the amount of public debt other than loans (loans) include:

• ordinary and arrears of wages, pensions and benefits to citizens;
• a tax investment loan;
• budgetary credit (investment, foreign exchange, loans and other instruments of budgetary regulation in accordance with the requirements of the loan as such);
• unpaid state order, commodity loan;
• unused financial liabilities and interest on them;
• and others.

As a rule, the state is a borrower of means, and other states, organizations and citizens are creditors. Therefore, the concept of public credit in economic literature equates to public debt.

Thus, public debt (in the broadest sense of the term) is a combination of economic monetary relations arising in the process of redistribution of free cash, the formation of funds of the centralized money fund of the state on terms of urgency, pay and repayment, taking into account the system of state debt management and its use with the aim of implementation of public administration functions.

This definition of public debt is characteristic of all states, when the amount of debt is significant and acquires a systematic, permanent character.

Public debt (in the narrow sense of the word) is a combination of economic monetary relations that arise between the state and other states, organizations, citizens regarding the withdrawal of free cash on terms of urgency, pay and repayment, taking into account the amounts of arrears for state obligations and interest for it achieve a balance between revenues and expenditures of the state budget.

In other words, public debt is the amount of debt for all government obligations and interest on it to business entities.

The whole aggregate of state loans can be divided into internal and external state loans.

An internal state loan is understood as the aggregate of monetary relations in the financial market within the territory of the country associated with the formation of state funds and the financing of public expenditure in the national currency. It represents the main part of the domestic public debt, which determines the financial state of the economy.