Debt Problems Research Articles

Defining and acting on water poverty in England and Wales

AbstractWater poverty is the lived condition households experience when they are struggling, or unable, to afford their water bills. Despite a relatively low public profile, it affected approximately 20% of households in England and Wales in 2020. Currently, as many as 34% of bill payers report struggling to pay fairly frequently. This comprehensive review examines definitions, prevalence and manifestations of water poverty through an analysis of 354 grey and academic documents, dating between 1985 and 2022. Synthesising the literature revealed how water poverty is a structurally-produced problem, reflecting trends in sector governance and wider societal processes. In the 1980s and 1990s, water poverty was characterised by household disconnections, as defaulting customers were considered a drain on the financial health of newly privatised utilities. Owing to civil society opposition, by 2000 water poverty became a technocratic problem of affordability and debt. Despite certain legal protections for vulnerable households, structural drivers of water poverty were unresolved and rates continued to rise, peaking in 2013/2014. Contemporary discourse emphasises extending availability, accessibility and flexibility of support, but structural inequalities remain hidden. It is, therefore, highly questionable whether the water sector in England and Wales can fulfil its commitment to ending water poverty by 2030.

LEGAL REMEDIES AGAINST BANKRUPTCY DECISION FOLLOWING CONSTITUTIONAL COURT DECISION NO. 23/PUU-XIX/2021

Bankruptcy is a legal institution created as a way out of debt problems that befall debtors. The bankruptcy mechanism consists of the Postponement of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang/PKPU) and bankruptcy itself. These two mechanisms have different legal consequences, especially regarding the available legal remedies, which differ between bankruptcy rulings originating from PKPU applications and those originating from bankruptcy applications. The available legal remedies also differ between bankruptcy rulings originating from applications submitted by debtors and those submitted by creditors. Constitutional Court Decision No. 23/PUU-XIX/2021 has changed the legal remedies provisions in Law No. 37 of 2004 concerning Bankruptcy and Postponement of Debt Payment Obligations. Prior to the Constitutional Court's decision, there was no opportunity for debtors to file legal remedies against a bankruptcy ruling caused by the rejection of a peace agreement due to the failure to reach an agreement in the PKPU process. However, after the issuance of Constitutional Court Decision No. 23/PUU-XIX/2021, this has changed with the opening of the opportunity for legal remedies in the form of cassation against a bankruptcy ruling due to the rejection of a peace agreement because an agreement was not reached in the PKPU process. It is important to avoid the PKPU process being used as a means to bankrupt debtors who are still solvent but are bankrupted because there are interests of business competition involved.

Determinants of Government Debt in Sub-Saharan African Countries: The Role of Conflict, Governance, and Economic Factors

Abstract In recent years, there have been growing concerns around the implications of large fiscal imbalances in sub-Saharan African countries (SSA). An ongoing debate focuses, among other things, on the determinants of public debt in the sub-region. Much of the recent work has, however, employed descriptive methods in quantifying the extent of the debt problem and in explaining the drivers thereof. Moreover, most studies only consider macroeconomic factors. Instead of focusing only on macroeconomic factors, this study considers the influence of conflict and governance as important drivers of public debt in SSA countries given that most of them have experienced (or are still experiencing) conflict and poor governance. Focusing on a sample of 38 SSA countries over the period 1996–2019, it employs a variety of panel methods, namely, the pooled OLS, one- and two-way fixed effects, and instrumental variables fixed effects to facilitate the comparison of results. The study finds compelling evidence showing that conflict and governance are important determinants of SSA’s public debt in addition to the economic factors. Policy recommendations based on the findings are discussed.

Does systemic property cause the continuing accumulation of severe debt in developed economies?

Even developed economies experience continuing severe debt problems. Debt crises were an old phenomenon, but since the global financial crisis of 2008, economists began to pay renewed interest on the subject. Recent studies show that unsustainable financial conditions that exist may be the decisive macroeconomic challenge in the 21st century. Unsustainable financial conditions mean nothing other than the overwhelming debt and debt relations. In this paper, the authors question whether there could be an inherent fundamental systemic cause that leads to creating unsustainable debt bubbles when the basic economic activity of supply and demand takes place. Upon making a scientific inquiry on the said problem, by employing deductive methodology, this paper finds out that there exists an ‘unavoidable inherent systemic contradiction’ in the economic system that leads to creating unsustainable debt growth. Understanding this unique behaviour of any money-based exchange economic system (not limited to capitalism) is essential to device new macroeconomic policy tools bringing stability to the global economy.

African Perspective of the Ukrainian Crisis: Assessments and Actions from China

The article is devoted to the assessment by the PRC analytical community of the impact of the Ukrainian crisis on the development of African countries, China-Africa relations and relations between Beijing and Western countries. The overall official position of the Chinese authorities regarding the crisis was detailed in a document distributed at the end of February 2023 entitled “China’s position on the political settlement of the Ukrainian crisis.” The publications of Chinese scientists and analysts concerning the African perspective of the problem, which were published mainly before the advent of the Government paper, dealt almost exclusively with aspects of the influence of the Special Military Operation on the intensification of the food crisis, the disruption of global value chains and the debt problem. They dealt with a fairly wide range of technical issues, but in the overwhelming majority they did not reveal the deep foundations and initial prerequisites for the problems that had arisen. At the same time they closely resonated with Western objectivist approaches to these issues.

Economic causes and social consequences of living in debt

Life on loan is increasingly becoming a habitual way of life not only for many people, but also for entire states. This phenomenon of modern reality requires scientific explanation and practical understanding in order to identify its possible consequences and prevent negative effects. This article is an attempt to contribute to the clarification of this issue. Living in debt is satisfying needs not from your own current income, but at the expense of borrowed funds. If this happens by borrowing the missing funds before the next salary without interest or with a small rate, this practice is caused by everyday circumstances and does not carry serious risks. It is a different matter when one has to borrow money in the form of bank loans for a long time with unclear prospects for servicing them, that is, paying monthly interest and paying off the principal debt on time. The phenomenon of living in debt arises in the case of regular use of consumer and mortgage loans due to a chronic shortage of current income and willingness to bear the risks associated with long-term debt servicing. The article deals with the problem of living in debt, which is relevant for the whole world and Russia. This issue is associated with the widespread use of borrowing to increase purchasing power in order to meet growing needs. The origins of the widespread practice of bank lending to households and its consequences for different segments of the population are investigated. The main motives of debt consumption are described and its size and dynamics in Russia in recent years are estimated. Attention is drawn to the debt problems faced by banks and corporations themselves, as well as states whose external and internal debt is constantly increasing. It is concluded that living in debt, which has become an everyday reality, is becoming an increasingly heavy burden for the population, business and states, fraught with serious economic and social consequences.

Investigating young adults' use of Internet credit services: A reflective‐impulsive dual‐process model

AbstractWhile Internet credit services are proliferating fast, they bring serious debt problems, especially to young adults, and further result in negative psychological and social issues. The present study aims to investigate the influential factors underlying the usage of Internet credit services among young adults. Particularly, a dual‐process model is proposed by integrating both the reflective and impulsive decision‐making process. While the reflective process is modelled based on the theory of planned behaviour, the impulsive process is manifested by examining the antecedents of impulse to use Internet credit services, including immediate gratification, materialism, and self‐control. A survey was administered among young adults and 992 valid questionnaires were collected. PLS‐SEM methods were applied to analyse the data. It was revealed that the reflective decision‐making process exerts significant influence on young adults' usage of Internet credit services, and the impulsive process plays important role in impacting people's usage of Internet credit services among the lower income group. In addition, immediate gratification and materialism were found to positively affect the impulse to use, whereas self‐control was identified as an inhibitor of impulse to use Internet credit services. Implications of the finding are discussed at the end of the paper.

Association of revision of Money Lending Business Act and suicide rate in Japan: An interrupted time series analysis.

Debt problems are associated with suicide. In Japan, the Money Lending Business (MLB) Act was revised in December 2006 and fully enforced in June 2010 to reduce multiple debt problems. This study aimed to examine the association between the full enforcement of the revised act and suicide rates. An interrupted time series analysis was used to the national registry data of death records between January 2000 and December 2016. Stratified analysis was conducted to assess the differences between gender and age groups. The effects of the full enforcement on the suicide rate were the greatest among men aged 40-64 years; after the enforcement, there was a significant decrease of -0.3085 per 100,000 persons in the level of the suicide rate (95% confidence interval [CI] -0.529 to -0.0881) and -0.0165 per 100,000 persons (95% CI -0.0215 to -0.0115) in the trend. Among women aged 40-64 and ≥65 years, an increase in the level of the suicide rate was observed after the enforcement. The full enforcement of the revised MLB Act was associated with decreased suicide rates, particularly among middle-aged men. Policy interventions for addressing debt problems may have the potential to prevent suicide.

Female Genius: Eliza Harriot and George Washington at the Dawn of the Constitution

Female Genius: Eliza Harriot and George Washington at the Dawn of the Constitution

Re-analysis of the EU public debt crises with NARX

Purpose- This paper employs the public debt equation of motion, which covers variables that represent a country's competitiveness, such as past public debt, GDP, external balance, real exchange rate, real interest, and inflation, to estimate the public debt of Southern EU countries (Greece, Ireland, Italy, Portugal, and Spain). The paper is designed to test whether the public debt equation of motion (see Croce and Ramon, 2003; IMF, 2013; Chirwa and Odhiambo, 2018), which is characterized by significant variables representing competitiveness in macroeconomics, can statistically account for the public debt of Southern EU countries after the monetary union period including the EU public debt crisis. Consequently, based on the findings, it will be determined whether the competitiveness problems of Southern EU countries are important in the EU public debt crisis. Methodology- The analysis is performed with the nonlinear autoregressive network with exogenous inputs (NARX) with quarterly data for the period from 2005Q1 to 2021Q4. In NARX, which is a dynamic non-parametric neural network used in time series analysis, the prediction performance of the model is more robust than other neural network models, as the gradient descent approaches the local minimum perfectly (see Lin et al., 1996; Gao and Er, 2005; Diaconescu, 2008). However, it is important to define the parameters correctly in NARX to obtain effective results. In the study, parameters are defined according to the minimum Mean Squared Error values. The feedback Levenberg-Marquardt (LM) algorithm, which produces fast and effective results, is used as the training algorithm. The performance of the training algorithm for robustness is compared with testing and validation. Findings- The analysis results reveal that public debt in Southern EU countries is statistically explained by the public debt equation of motion with a confidence ratio of over 95%. Conclusion- This result implies that the public debt problem in Southern EU countries is associated with their competitiveness (see also Hall and Soskice, 2001; Dallago and Guglielmetti, 2011; Hall, 2012; Lane, 2012; Gros, 2012; Iversen et al., 2016; De Ville and Vermeiven, 2016; Frieden and Walter, 2017). In addition, the analysis goes beyond parametric analyzes that relate economic growth or a few variables with public debt and reveals the importance of inclusive variables and non-parametric analyzes in the estimation of public debt. Keywords: EU public debt crises, Southern EU countries, NARX, competitiveness problems JEL Codes: C45, F35, F45, N14, N24

Rational versus Irrational Behavior of Indonesian Cryptocurrency Owners in Making Investment Decision

The purpose of this study is to investigate the salient factors that influence Indonesian cryptocurrency owners in making their investment decision. This study employs intergroup bias, subjective norms, overborrowing, and spending control to explain cryptocurrency investment behavior. The questionnaire was collected from 309 respondents from the five largest internet user areas: Jakarta, Surabaya, Bandung, Semarang, and Medan. This study executes the research framework using binary logistic regression. The results reveal that intergroup bias and overborrowing are the most impulsive factors contributing to the cryptocurrency investment decisions over the past year. Furthermore, after November 2021, Indonesian crypto owners are more irrational in a bearish period since their investment decisions are driven by their desire to be accepted in the social group. Moreover, when they have overindebtedness, instead of solving their debt problems, they prefer to spend their money on cryptocurrency investments. The subjective norms’ influencers suggest that crypto owners not invest when the cryptocurrency price is sharply declining. The findings contribute to the dual-systems perspective and social contagion theories, enriching the empirical study regarding investment behavior.

Unpleasant surprises? Debt relief and risk of sovereign default

PurposeThe Covid-19 pandemic has rekindled interest in sovereign debt crises amidst calls for debt relief for developing and emerging countries. But has debt relief lessened the debt burdens of emerging and developing economies? The purpose of this paper is to empirically address this question. In particular, the focus is on the implications of debt relief and institutional qualities for sovereign debt in emerging and developing economies.Design/methodology/approachThe model extends the framework on the probability of default by incorporating the receipt of debt relief by a debtor country. Doing so allows to better explain movements of sovereign defaults relating to debt relief. The model is estimated via the regular probit regression.FindingsThe analysis shows that the debt relief provided, thus, far, failed to ease the debt overhang problems of developing and emerging countries and reduced investment. The current debt relief schemes may underscore the prospects of self-enforcing and self-fulfilling sovereign debt crises rather than eliminating the dilemma completely. Regarding the forms of debt relief, the analysis shows that debt forgiveness offers favourable prospects in terms of debt sustainability and economic outcomes than debt rescheduling. Perhaps, the sovereign debt crises, particularly in low-income countries, hinge on insolvency problems rather than transitory illiquidity issues.Practical implicationsAny debt relief mechanism should consider seriously the potential incentive effect that reinforces expectations of future debt-relief initiatives. Importantly, solving the sovereign debt problem requires a programme for sustained investment and economic growth, while not discounting the critical role of prudent debt management policies and institutions.Originality/valueThis study contributes a different angle to the debate on sovereign debt distress. Aside from the structural and economic factors, this study investigates the role of debt management policy in the debtor nation and the implications of debt relief benefits for sovereign risk. The framework also focuses on whether the different forms of debt relief exert distinctive impacts.

ФІСКАЛЬНА СТІЙКІСТЬ ЯК ЕЛЕМЕНТ НАЦІОНАЛЬНОЇ ЕКОНОМІЧНОЇ БЕЗПЕКИ В УМОВАХ ГЕОПОЛІТИЧНИХ РИЗИКІВ

Fiscal sustainability is crucial for the overall economic security of a country. It means the ability of the government to meet its financial obligations in the long run without relying on excessive borrowing and without resorting to inflationary policies. The purpose is to explore the key challenges to strengthening fiscal sustainability as an element of national economic security in the face of new geopolitical risks. Global economic crises, such as the 2008 financial crisis, the coronavirus pandemic, the war in Ukraine, crisis events in the banking sector in March 2023 can also affect fiscal sustainability. Economic crises can lead to a decline in demand for goods and services, lower tax revenues, and increased government spending on social programs such as unemployment benefits. This can lead to an increase in public debt and budget deficits. High levels of public debt also increase the risk that the government will default on its obligations, which could undermine investor confidence and increase borrowing costs. This can further exacerbate the problem of high public debt, as the government may have to devote even more resources to servicing this debt. According to the concept of "debt rejection" for developing countries, as a rule, there is a "lack of freedom" regarding the regulation of the debt level, although it is managed using the most modern methods. Identifying the determining factors for a specific country, highlighting the threshold of "rejection" of debt is a basic approach to debt management, in particular, its restructuring, determining an acceptable level of debt, using international lending to mitigate fiscal shocks and accelerate growth. To address the problem of high public debt, governments can implement measures such as spending cuts, raising revenues through taxation, or implementing structural reforms to improve economic growth. However, these measures can be difficult to implement as they may require difficult choices and sacrifices. Nevertheless, addressing high public debt is important for achieving fiscal sustainability and promoting national economic security.

Залучення боргових фінансових ресурсів на зовнішньому ринку: досвід України

The current macroeconomic and political situation in Ukraine is characterized by instability and impact of a number of adverse factors. In such circumstances, Ukraine's debt relations are focused on the increased need to attract financing. At the same time, because of the ongoing war, Ukraine's expenses are constantly and rapidly growing. The revenue side of the budget under such conditions is limited. Today it is impossible to adhere to the chosen strategic benchmark – reducing the share of the external public debt and loans in foreign currency. The article is aimed at studying the practical aspects of attracting financing by Ukraine in the foreign market with an emphasis on the problems accompanying this process. The article examines the main indicators of attracting financial resources in the foreign market, the structure of Ukraine's debt in terms of currencies, as well as an overview of the risks that accompany the current debt situation. The primary task of Ukraine's debt policy is to optimize the attraction of financial resources in the foreign market within the security corridors. Taking into account the experience of attracting financial resources both in the domestic and foreign loan capital markets will allow defining the existing problems and identifying the directions for optimizing the attraction of such financing in the current crisis. Despite the significant need for financing and limited opportunities to attract resources in the domestic market, it is proposed to limit the use of external sources. In the current period, it is proposed to focus on restructuring the existing debt and finding opportunities to attract soft lending programs. Further, in the postwar period, a clear and flexible debt policy should be formed with the definition of quantitative benchmarks for Ukraine's debt security. However, prospects for solving Ukraine's debt problems will appear only after the settlement of the political situation in the country.

Profiting from Slavery and Emancipation: Compensation, Capital, and Collateral in Nineteenth-Century Senegal

The relationship between capitalism and slavery has been contentious because, in the Atlantic economy, enslaved people functioned as commodities, as labor, and as assets. The transition away from the Atlantic slave-trading system across the nineteenth century affected the stakeholders in these economic functions differently. Compensated emancipation in Senegal provides an opportunity for thinking about the possibilities and limitations of compensation in facilitating capital's continuity. This article traces how individuals who had invested in enslaved labor managed the transition of emancipation and reinvested their compensation claims. It explores how the process of compensation addressed the problem of commercial debt in ways that allowed for a continuity of many of Senegal's urban business elite and their family firms through the end of the nineteenth century.

ОСОБЛИВОСТІ ОБЛІКУ ДЕБІТОРСЬКОЇ ЗАБОРГОВАНОСТІ В СУЧАСНИХ УМОВАХ ГОСПОДАРЮВАННЯ

The article examines the accounting peculiarities of the payments with debtors and establishes that this issue is extremely relevant in modern economic conditions, especially in the presence of a financial crisis, which leads to problems of untimely payments, doubtful and bad debts. Considering the economic activity of the enterprise as a system that consists of defined economic processes such as supply, production, sale, it was determined that the occurrence of account receivable is an objective and natural phenomenon in the process of enterprise’s economic activity. It is mostly typical for the supply process (according to payments for advances issued) and sales (according to payments with buyers, customers and other contractors). The size and the structure of account receivable are influenced by external and internal factors related to both, the general condition of the country's economy and the organization of the company's work. It was established that internal factors, in particular, accounting and control factors, have the most significant influence, since the amount of account receivable depends on the accounting and credit policy chosen by the enterprise, the practice of performing accounting and payment operations, the professionalism of accounting employees and properly organized form of control over payments with debtors. The organization of account receivable accounting begins with the development of the Order on accounting policy. The results of the study showed that it is advisable to include three sections in the Order: organizational, technological, methodical in terms of the relevant elements of each section that will contribute the formation of objective and relevant information about account receivable. It was established that the payments accounting with debtors covers all the stages of the accounting process (primary, current, summarizing) and takes place at all stages of the lifecycle of account receivable (formation, use, repayment). Appropriate accounting tasks have been developed in order to create an effective account receivable accounting system, to achieve its optimal level and ensure timely control and analysis of payment operations for each stage and cycle.

Сучасний стан зовнішнього боргу США

In recent decades, the world economy is characterized by a constant increase in external debt of almost all countries of the world (the only exceptions are those countries to which investors and creditors have no confidence), which exacerbates the problem of world debt and the interdependence of creditor countries and debtor countries. The article is aimed at analyzing the current state of foreign debt of the United States as a country that still has an impeccable credit history and high credit ratings, and at the same time in many publications is considered as a potential threat to the whole world in case of default. During the studied period (70 years), the U.S. external debt has been constantly growing, and the trend analysis conducted in the work indicates that this growth will continue in the medium term. The U.S. foreign debt in absolute terms is the largest in the world, having almost doubled over the past 10 years. At the same time, among the countries that have the highest ratio of total public debt to GDP, the United States ranks only fifth, because the USA have the largest GDP in the world. Among the main reasons for such a significant public debt, analysts point out the world’s largest military budget, significant tax cuts in recent years and significant costs to overcome the consequences of COVID-19. Due to the high level of GDP, high credit ratings and the status of a reserve currency in the U.S. dollar, the U.S. government securities are attractive to investors. Central banks of other countries, pension, insurance and investment funds still have a sufficient level of confidence in the United States and invest financial resources in debt securities of the U.S. government. The prospects for the U.S. foreign debt depend on the ability of the Federal Reserve System (FRS) to find solutions to domestic problems, among which the most acute are rising inflation and reducing household spending. A U.S. default is considered extremely unlikely, but in case of its announcement, it would have serious consequences for the global economy, creating uncertainty not only for the U.S. economy, but also for global financial stability. A default on the U.S. external obligations would result in a downgrade of the U.S. credit rating, which would cause significant volatility in the global stock market, a drop in stock indices and an increase in the cost of borrowing, which, in turn, would significantly reduce the ability of businesses and households to obtain loans. The fall of the U.S. dollar, which will result from the announced default, will cause commodity prices, including oil, to rise, leading to higher inflation globally. There will also be problems with supply chains in international trade.

Макроэкономические шоки 2022 г. и суверенные фонды

In 2022, instead of getting back to pre-pandemic “new normal” the world entered into another period of severe economic and geopolitical turbulences. In terms of macroeconomics, the most evident and painful was the hike of hydrocarbons’ and food prices. This drove inflation rates to the levels not seen in recent 40 years. In attempts to cool down underlying inflationary pressures the monetary authorities of many countries had to stop the policies of quantitative easing (QE) and started to raise basic interest rates. In this environment the governments, businesses and families are facing massive debt problems. The main stock market indices crushed deeply and simultaneously in 2002 which meant substantial depreciation of assets. All these macroeconomic shocks seriously affected the performance of sovereign wealth funds which currently present a solid and increasingly influential group of global assets’ holders and managers. The steady growth of the value of their assets under management (AUM) was interrupted last year. According to preliminary analysis, the total losses of AUM can reach circa 1 Trillion US$. Just one fund – Norway’s Government Pension Fund Global (GPFG) – reported a depreciation of its assets by as much as 165 Billion US$ as of end‑2022. This is an amount comparable to the GDP of a mid-size country, for instance Ukraine before current military conflict. However, for Norway’s GPFG and similar state-owned investors (SOIs) of other countries such losses were not critical. SWFs are, basically, “tolerant investors” with very long view on value creation and operational planning, so they easily absorb paper losses. Simultaneously, the huge SWFs of oil and gas exporting Gulf countries enjoyed the hike of hydrocarbons’ international prices and hurried up to invest massive influx of unexpected revenues into depreciated assets in troubled economies of the USA and Europe. More countries tended to expand the mandates of their sovereign funds beyond traditional stabilization and saving functions. Strategic development funds became increasingly demanded by the governments and may appear even at the supranational level (the projected European Sovereignty Fund). So far, it may be concluded that in general macroeconomic shocks of 2002 did not undermine the positions of SWFs as strong and resource-rich global investors. On the contrary, it looks like that their role as an efficient tool of governmental policies of offsetting and preventing multiple market failures is getting to be further strengthened in upcoming harsh times.

Debt Sustainability of Latin American Countries in the post-COVID Economy

Annually growing public debt of Latin American countries is a source of a consistent increase in regional crisis potential. The COVID-19 pandemic has exacerbated political instability and deepened socio-economic imbalances in the region. The chronic dependence on debt financing increases the region’s vulnerability to external shocks and makes it much more challenging to implement public policies to achieve the UN Sustainable Development Goals. The purpose of the article is to reveal the increasing nature of the debt risks inherent in the Latin American countries, and to propose measures to overcome them. The authors summarize the views of leading Russian and foreign experts on the debt sustainability of the region. Based on the statistical data of international organizations, regional development institutions, as well as analytical materials published by Bloomberg, Fitch, White Case or Deloitte, the authors analyze the approaches to solving the Latin American debt problem. However, considering recent debt dynamics, new public borrowings may cause a deterioration of the regional debt sustainability in the future. This issue reinforces the uncertainty in international investment circles regarding the future solvency of the Latin American region. The situation in the Latin American countries is exacerbated by the uncertainty whether positive rates of economic growth resume in the medium term that have been lost due to volatile global commodity prices. The study examines the prospects for regional economic stabilization in Latin America and the Caribbean, including through the use of new debt financing mechanisms to meet current financial needs and minimize the risks of financial vulnerability.

Pakistan’s Debt Problem: Its Changing Nature and Growing Gravity (The Distinguishedl Lecture)

Pakistan’s Debt Problem: Its Changing Nature and Growing Gravity (The Distinguishedl Lecture)