Public Borrowing Research Articles

Impact of Inflation Rate, Remittance Income, and Public Loan on Government Expenditure: Evidence Derived from the Nepalese Economy

This study examines the impact of inflation rate, remittance income, and public borrowing on the government's annual expenditure. This study is based on the descriptive and exploratory research design. It follows the positivist research philosophy and quantitative characteristics. It uses secondary data collected from various economic surveys in Nepal and reports from the World Bank. It covers 33 data points from 1990 to 2022. Simple statistical and econometric tools like descriptive statistics, robust regression analysis, Normality test, and confidence interval test are used in this study. The inflation rate, public borrowing, and remittance income are responsible for increasing Nepal's government expenditure. The inflation rate is not individually significant in determining the spending in Nepal. Remittance income has a considerable positive impact on total expenditure in Nepal. One unit increase in remittance income results in a 0.109648 unit increase in government expenditure in Nepal. Likewise, public borrowing is highly significant in explaining government expenditure. One unit increase in public borrowing results in a 1.145037 unit increase in government expenditure in Nepal. Nearly 73.69 percent variation in total government expenditure depends on Nepal's inflation rate, remittance income, and public borrowing. Policymakers in Nepal should focus on bolstering remittance inflows and implementing prudent public borrowing management strategies to foster sustainable economic growth while recognizing the limited influence of the inflation rate on government expenditure.

Sovereign risk and Financial Stability. Evidence from Eurozone Countries

We will investigate in this paper the relationship between sovereign risk and domestic banks' exposure to the government debt, using data for eurozone countries. The sovereign-bank nexus shows that there are substantial influences between the fiscal and the financial sector and that in absence of enough fiscal buffers, the rise in public borrowing will contribute to financial market imbalances, through various channels. We apply impulse-response functions in order to investigate the effect of a shock produced to sovereign risk to banks' exposure to government debt. Our results confirm that there are significant interlinkages between sustainable fiscal positions and financial markets performance, so that reducing debt levels can contribute to decreasing sovereign risk premia and improvement in financial conditions, decreasing the exposure of the banking sector to holding large shares of debt, which can result in deteriorating economic conditions.

Impact of Public Debt on Poverty in Nigeria: A Vector Autoregressive Analysis

This study examined the impact of public debt on poverty in Nigeria for the period 1985 to 2021. The study regressed poverty against public debt in a vector error correction model using the Johansen approach. The study found a long-run relationship between public debt and poverty in Nigeria. The effect of public debt on poverty in Nigeria was found to be positive and permanent, becoming more pronounced with time. The study recommends the government’s deliberate effort in restraining continuous unsustainable public borrowing while also determining the maximum threshold at which debt servicing becomes poverty-reinforcing.

MONITORING OF THE PUBLIC DEBT OF UKRAINE UNDER THE CONDITIONS OF MARITAL STATE

Abstract. Public debt exists as an economic and legal phenomenon in most countries of the world, as a rule, it is formed as a result of financing the deficit of the national budget. For countries with effective public debt management institutions, it is an engine of rapid economic development. In many countries, the creation of public debt is associated with the government's attempts to improve the socio-economic conditions of people's lives by modernizing infrastructure, developing education, science, health care, improving social welfare, etc. Public borrowing is a source of investment, a means of reducing the negative impact of external factors, and a fairly effective incentive that helps accelerate the growth of the country's economic potential. Thanks to borrowing, our country received additional resources to meet public needs, overcome а certain technological lag in national development, and outline prospects for economic growth. But on the other hand, such borrowings can become a debt burden, since the economic situation in the country does not allow for effective repayment of debts, which in turn only deepens the country's debt problem. Thus, the main problem of public borrowing, in our opinion, is a real threat of reliance on the state and creditors, which has a stable upward trend. In the conditions of war, national obligations, mainly to foreign countries, are growing rapidly. Inefficient management of public debt can lead to economic instability in countries. In our opinion, an increase in external public debt can lead to a decrease in the state authority of Ukraine in the international economic arena and cause mistrust and doubts about the state's ability to ensure the timely fulfillment of its financial obligations.

Forfeiture and refund on public expenditure: A model for effective financial management in Nigeria

The study examined forfeiture and refund on public expenditure: A model for effective financial management in Nigeria. the specific objectives of the study were to: establish the effect of forfeiture and refund in improving actual revenue collected, examine the effect of forfeiture and refund in improving actual public expenditure and determine the effect of forfeiture and refund in improving public borrowing in Nigeria. Three research questions guided the study. It employed a documentary research design. The finding showed that forfeiture and refunds in improved actual revenue collected, that forfeiture and refunds in improved actual public expenditure and that forfeiture and refunds will reduce public borrowing in Nigeria. The study concluded that forfeiture and refund on public expenditure is a good model for effective financial management in Nigeria. Forfeiture and recovery of proceeds of corruption are vital aspects of the anticorruption efforts of the present government in Nigeria. The study among others recommended that Building anti-corruption agencies' capacities through continuous training and re-training programs and international cooperation will block a haven to corruption and its assets, and it will enhance global combat against corruption. The effectiveness of any recovery, confiscation and asset forfeiture legal regime depends on institutional capacity and funding.

NextGenerationEU: Hamiltonian moment or European New Deal?

Abstract During the coronavirus disease (COVID-19) pandemic, the European Union (EU) took the unprecedented step of borrowing 750 billion euros on capital markets, part of which was to be spent in the form of grants. As prior interpretations of the Union’s constitution tended to suggest that it had no power for deficit spending, NextGenerationEU (NGEU) arguably constitutes a major constitutional transformation for the Union. As so often in the literature on the EU, the comparison was made with the federal system of the USA: Commentators likened the Union’s constitutional transformation to the transformation engineered by Hamilton, the financial founding father of the USA, as well as Roosevelt’s New Deal. When the USA was teetering on the brink of bankruptcy, Hamilton transformed the landscape of public debt in the USA by proposing to restructure and assume the debt of the states on the balance sheet of the federal government. For the first time, the public debt of the federal government of the USA played a critical role in its economy. The Great Depression prompted another transformation for the finances of the USA. Roosevelt promised his voters to bring back economic growth. During Roosevelt’s tenure in office, the public borrowing of the USA went up significantly. This contribution examines the constitutional controversies provoked by Hamilton’s and Roosevelt’s transformative policies. It argues that, in spite of some similarities, the question of the constitutionality of deficit spending was controversial neither in Hamilton’s nor in Roosevelt’s day. More fundamentally, it argues that both Roosevelt and Hamilton had a transformative vision for the economy not shared by NGEU.

Forfeiture and Refund on Public Expenditure: A Model for Effective Financial Management in Nigeria

The study examined forfeiture and refund on public expenditure: A model for effective financial management in Nigeria. the specific objectives of the study were to: establish the effect of forfeiture and refund in improving actual revenue collected, examine the effect of forfeiture and refund in improving actual public expenditure and determine the effect of forfeiture and refund in improving publicborrowing in Nigeria. Three research questions guided the study. It employed a documentary research design. The finding showed that forfeiture and refunds in improved actual revenue collected, that forfeiture and refunds in improved actual public expenditure and that forfeiture and refunds will reduce public borrowing in Nigeria. The study concluded that forfeiture and refund on publicexpenditure is a good model for effective financial management in Nigeria. Forfeiture and recovery of proceeds of corruption are vital aspects of the anticorruption efforts of the present government in Nigeria. The study among others recommended that Building anti-corruption agencies' capacities through continuous training and re-training programs and international cooperation will block ahaven to corruption and its assets, and it will enhance global combat against corruption. The effectiveness of any recovery, confiscation and asset forfeiture legal regime depends on institutional capacity and funding.

ТЕОРЕТИЧНІ ЗАСАДИ БЮДЖЕТНОГО МЕНЕДЖМЕНТУ

The article is devoted to the study of the theoretical foundations of budget management. The article defines the place and role of budget management in effective state administration and local self-government. The peculiarities of budget management in special conditions were considered, as well as a functional analysis of budget management was carried out. The budgetary mechanism of innovation and investment development, which is one of the most important modern concepts in budget management, is substantiated. The current state and development trends of budget management in Ukraine at the state and local levels are studied. Different functional approaches to budget management are considered, the principles of budget management are defined. The latest IT tools for budget planning and monitoring budget execution are characterized, their prerequisites and advantages are given. The problems of the budget process in Ukraine are substantiated and the key aspects in the field of budgeting are substantiated. The main problem in Ukraine in recent years is the negative trend in the development of the budgeting process, and therefore, solving the issues of the management of budget expenditures and control over the effective use of budget funds is an urgent task. The analysis of the current state of budget management in Ukraine made it possible to determine the following directions of its development and improvement. Among the main ones: imbalance of revenue and expenditure parts of budgets of all levels and, as a result, its permanent deficit; widening of the gap between the volume of public borrowing and the repayment of the public debt, which causes the growth of the public debt in significant amounts over the last studied years; decrease in the degree of solvency of the state. As a result of the assessment of the current state of budget management at the meso-level, the presence of factors and factors that lead to the emergence of imbalance and inconsistency between its target orientation and tasks in the context of state regulation of the economy and the current state of formation and implementation of local budgets was ascertained. In the conditions of transformational changes, the main and necessary directions for improving budget management should be the introduction of budget control over the effectiveness of budget program implementation; improving the quality of capital budgeting; optimization of the number of budgetary state target programs; increase in budgetary security per capita; reduction of public administration expenditures and increase of social expenditures.

Public debt from the viewpoint of national security and sovereignty

The paper examines public debt from the viewpoint of national security and sovereignty. The current situation with public debts in different types of countries is revealed. The risks, challenges and threats in the public debt sphere are presented. Different forms of public borrowings, such as loans from international organizations and banks, issuance of the securities on the domestic and international markets were analyzed. It was shown, that the international credits are characterized by the conditionality. In the case of borrowing on the open market using securities, the debtor depends on the current market conditions and can face significant deterioration of the situation. It was proved, that no form of borrowing is free from potential problems. The suggested classification of risks, challenges and threats can be useful for the efficiency of the public debt management.

Climate policy and optimal public debt

AbstractEmploying a two-period model with an environmental externality, this paper investigates the relation between emission taxation and the optimal level of public debt. The central insight is that the effect of emission taxation on optimal borrowing is ambiguous and may lead to lower or higher optimal debt. In the context of climate change, we even show that the counterintuitive result of a higher optimal debt level is likely in the short-run and possibly also in the long-run, a result that provides a novel rationale for public borrowing. Our basic arguments turn out to be robust against several generalization.

Specific features of Ukraine’s public debt management in conditions of war

Introduction. The debt policy of the state is essential for ensuring economic sustainability and development of the country. Effective public debt management helps to prevent crises and ensure financial stability, and gives the government more leverage to respond to economic challenges, which is especially important for the Ukrainian economy that is operating in a war time.Purpose. The purpose of the article is to study the peculiarities of public debt management, directly in the context of war, based on a comprehensive analysis of the debt policy instruments used by Ukraine’s government in the current circumstances.Methods. The analysis of cause and effect relationships was used to identify the features that determine the debt policy of our country in the conditions of war. Methods of economic and statistical analysis, such as dynamic analysis, structural analysis, comparison and correlation, were used to analyze and evaluate the main trends related to the public debt management in Ukraine.Results. The article examines the impact of the main factors that have impact on the formation of the state’s debt policy and, accordingly, determine the peculiarities of public debt management in modern conditions. The tendency of Ukraine’s debt obligations growth in the period of 2022-2023 is revealed. It is established that in the structure of debt, external public borrowings prevail over internal ones. It is found that the main debt instrument in the domestic market is government bonds, and in the external market - loans received from international financial organizations. The author substantiates the expediency of using specific instruments in the process of public debt management at the current stage of functioning of the Ukrainian economy, as well as in the post-war period, based on international experience.Prospects for further research include the need to develop an effective strategy for managing public debt in the postwar period in order to create favorable conditions for the reconstruction of the country and further sustainable economic growth.

Accounting for Borrowing and Economic Performance in Nigeria

Accounting for public borrowing and economic performance has been under constant investigation. This study examined the impact of public borrowing on economic performance of Nigeria between 1981 to 2021. The study adopted purposive sampling technique and analyzed using robust ordinary least square (ROLS). The independent variables are, Federal government domestic debt (FDD), Federal government foreign debt (FGFD), cost of servicing debt (CSD), Federal government total expenditure (FGTE) is proxy for dependent variable while, Federal government retain revenue (FGRR) is proxy for control variable. The study reveals that that of FGRR, CSD, FGFD and FGDD have positive and significant influence on the federal government total expenditure. The study was theoretically anchored on Dual Gap Analysis Theory, Adam Smith Theory on Debt and The Ricardo Theory of Public Debt. The study then concludes that Nigeria’s total expenditure has risen astronomically through domestic debt, foreign debt, government retained earnings and debt servicing. The study then recommends very strong internal control should be enforced over utilization of borrowed fund, domestically or externally, as well as investigation of the internal control process of borrowing in Nigeria. Again, debt should be reduced so as to reduce the cost burden of servicing it as debt overhang is imminent in Nigeria. The study recommends the investigation of the internal control process of borrowing in Nigeria for further study.

Towards a green future for Sub-Saharan Africa: do electricity access and public debt drive environmental progress?

The combination of rising debt levels, poor electricity access, and environmental deterioration could threaten the attainment of the sustainable development goals (SDGs). Hence, this inquiry examined the implications of public borrowing and access to electricity on environmental sustainability (proxied by ecological footprint (ECOL) and carbon dioxide (CO2) emissions) in Sub-Saharan Africa (SSA), largely overlooked in the literature. In addition to pre-estimation, diagnostic, and robustness checks utilized in the study, the instrumental variable generalized method of moment (IV-GMM) approach is employed to examine annual data from 39 SSA economies between 2005 and 2018. The key findings indicate that public debt negatively influences environmental sustainability in the region at a certain level of threshold, while access to electricity has the potential to trigger environmental sustainability but remain below the expected threshold to mitigate environmental damage in SSA. The study provides recommendations for SSA policymakers to significantly reduce pollution and protect the environment which is vital for sustainable development.

Surfing the credit wave: Government popularity as driver of credit cycles

This paper analyses the interaction between credit and political cycles, arguing that short-termist governments will seek to ride and amplify credit cycles for political gains. Specifically, it tests for the existence of political credit cycles not only before elections but throughout the term when executives seek to bolster support in periods of popularity drops. Compiling a unique database on government approval from opinion polls in 57 countries starting in 1980 allows to test this accountability channel empirically. There is strong evidence that drops in government popularity are systematically associated with larger future private credit cycles. The existence of such political cycles appears to mainly target credit to households, increases the likelihood of bad credit booms, and is robust to multiple checks for confounding factors. This paper does not find similar cycles in public borrowing. In addition, a higher level of government debt and a decrease in fiscal spending appears to reduce the likelihood of such political cycles in private credit, which adds a new perspective on the interaction between private debt and fiscal policy.

Racial Capital, Public Debt, and the Appropriation of Epekwitk, 1853–1873

This article argues that public debt financing facilitated the appropriation of the territories of Indigenous nations in the British settler colonies and does so through a detailed examination of Prince Edward Island’s public debt. The island’s government used public debt financing as a technique to direct capital into the colony, but to receive loans, the colonial government first needed credit. Settler-colonial credit derived from colonial governments’ claiming the territories of Indigenous nations as government assets. This history highlights the deeply racial characteristics embedded in the expansion of global public debt financing that characterized finance capitalism beginning in the 1820s. In this way, the unique history of the island and its “land question” can be placed into the broader global context of debt markets and processes of racial capital. Specifically, the 1853 Land Purchase Act used public borrowing to purchase lands from British landowners so that the island’s government could hold the land title. British landowners had their ownership rights secured despite the eighteenth-century Peace and Friendship Treaties that guaranteed the Mi’kmaq nation rights to their territory, which included Epekwitk, what the British named Prince Edward Island.

The Interest-Free Instruments Used for Public Borrowing in the Ottoman Empire and Medieval Europe: A Comparative Perspective

Borrowing is not only a practice of individuals and corporations, but the states also borrow to afford their expenditures. Similar to individuals, the states have borrowed since ancient times. Most of such loans have been at interest. However, the authorities have restricted or prohibited interest-based lending in various societies. Thus, the city-states of Medieval Europe and the Ottoman Empire could not always use ordinary borrowing instruments due to the prohibition of interest. Since, in recent years, the modernized forms of the early interest-free public borrowing methods are being asserted to be used by modern economies as well, the paper evaluates the methods used by the European city-states and the Ottoman Empire. At first, rentes and compera, the public borrowing methods used by city-states in Medieval Europe, are presented. Then, iltizam, malikane, and esham, the instruments used by the Ottoman Empire, are introduced. Lastly, the similarities and discrepancies among these interest-free methods utilized by the city-states and the Ottoman Empire are scrutinized.

Deficit Financing and Economic Growth: Empirical Evidence from Nigeria

The impact of deficit financing on economic growth has long been recognized in the extant literature given that this type of financing is germane to accelerated and sustainable economic growth. Yet, Nigeria did not seem to have utilized deficit financing proceeds to invest in those related infrastructural facilities that would generate income and augment domestic savings, thereby helping to make and sell quality products and services that are internationally competitive, and ultimately stimulate economic growth. Rather, the seemingly weak governance in the country engaged in massive misappropriation of public funds and outright corruption thereby exacerbating unemployment, insecurity, and widespread poverty both in the urban and rural areas of the country. The main aim of the study therefore was to investigate empirically the impact of deficit financing on economic growth in Nigeria for the period 1981 to 2019. Secondary data for the study were sourced from the Central Bank of Nigeria and the World Bank Global Development Index. The fully modified ordinary least squares methodology of the econometrics was employed to analyze the data of the study. The major findings of the study showed that the federal government domestic debt variable, the federal government budget deficit variable, the foreign exchange reserves variable, and the broad money supply variable exerted positive impacts on economic growth, while the external debt variable exerted a negative and insignificant impact on economic growth in Nigeria. The study therefore concluded that public borrowing in Nigeria can only induce rapid and sustainable economic growth only and if only borrowed funds are massively invested in related infrastructural facilities that would generate revenue which would augment domestic financial resources. Accordingly, the study recommended that the federal government of Nigeria should carefully study the state of its economy to enable it invest in those infrastructural facilities that are thought germane to the achievement of sustainable economic growth.

Statistics of Economic Growth in Developing Countries: A Case Study of Rwanda

Purpose: This study sought to analyze how economic growth in developing countries is influenced by public borrowing referencing on Rwanda as a case study. Methodology: The study used time series data from 1980 to 2018. The study used domestic debt and external debt to analyze how it influences Rwanda’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the National Bank of Rwanda and the debt office in Rwanda. The study employed multiple regression model to identify the relationship between the dependent variable (GDP) and the independent variables (domestic debt and external debt). The t-test was used to confirm the formulated hypotheses at the 5% significance level. Findings: The study found out that a positive relationship exists between IMF Loan and Rwanda’s gross domestic product, while a negative relationship exists between domestic debts and Rwanda’s gross domestic product, which violates the Keynesian theory of public debt. Conclusion: The study concludes that both domestic and external debt significantly affect economic growth in Rwanda. Recommendation: The study recommend that developing countries should develop a good structure of Debt Management Office including a plan for capacity building in order to make its proper debt strategy analysis without external support. The study also recommend developing countries to reduce reliance on internal borrowing to reduce competition between citizens and the government which can reduced economic growth. Furthermore, the study recommend developing countries to account for public debts and ensure that such debts are solely acquired for economic purposes rather that political purposes.

Nexus between Public Debts, Poverty and Unemployment Rates in Nigeria: A Vector AutoRegression (VAR) Approach

Notwithstanding the upsurge in public debts, it is absurd and worrisome to note that socioeconomic indicators like poverty and unemployment have shown gloomy pictures in Nigeria. The absurd situation makes it unclear on the precise nexus between public debts and unemployment rate on the one hand and poverty rate on the other hand. Consequently, this paper analysed the nexus between public debts, poverty and unemployment in Nigeria. Secondary data of public debts (measured by internal and external debts), poverty and unemployment rates were obtained from the Central Bank of Nigeria statistical bulletin and National Bureau of Statistics during the period 1981-2021. Using an unrestricted vector auto-regression model, the study indicated that neither internal nor external debts had any significant impact on poverty; however, they influence the level of unemployment rates in Nigeria. Impliedly, most of the public debts incurred within the period of investigation were not growth-oriented and could partly be explained by the fact that most of the borrowings were mainly to finance trade deficits, which were mainly consumable goods. The paper recommended that the current debt-togross domestic product ratio of less than 20 percent should be sustained to ensure that debt remains within the internationally recommended threshold for developing economies like Nigeria. Also, future public borrowings should be targeted at specified productive sectors of the economy that would engender growth in the long-run in terms of job creation and poverty alleviation; this can be achieved via the procedure of tying every public borrowing to specific growth-driving project that are oriented towards job creation and alleviation of poverty

ЗОВНІШНІЙ ДЕРЖАВНИЙ БОРГ УКРАЇНИ В УМОВАХ ВІЙНИ

The article is devoted to the assessment and analysis of the dynamics of external public debt and key indicators of external debt security of Ukraine for 2009 – July 2023. During the war, Ukraine is at a critical juncture where it must balance the imperative of post-conflict reconstruction with the need to manage external debt to ensure economic sustainability. The multifaceted nature of this challenge requires an integrated approach that encompasses policy coordination, diplomatic engagement, and in-depth economic analysis. The key emphasis in this study is on the analysis of the external public debt of Ukraine, in the context of the challenges caused by the war, highlighting the relationship between economic strategies and the needs of post-war reconstruction. The analysis of key indicators of external debt security proved a critical level of external debt burden. Based on the constructed Laffer curve, the threshold value of the ratio of external public debt to GDP is determined. The article is devoted to the study of theoretical and practical aspects of the assessment and analysis of external public debt and key indicators of Ukraine's external debt security, for the development of an effective external public debt management system and the transformation of public borrowing into a tool for post-war and post-war recovery of the country. The following scientific methods were used to achieve the goals of the scientific research: analysis and generalization – to study the current state of external debt security in Ukraine; comparison and compilation - for the analysis of the system of external debt security indicators; statistical analysis – to study the dynamics of debt security indicators and calculate an integral index based on them. Based on the analyzed dynamics of the external public debt, a conclusion was made about the "critical" debt load with peak values in 2014 (military conflict in certain territories of Donetsk and Luhansk regions), in 2020–2021 (overcoming the negative consequences of the global Covid-19 pandemic) and in 2022–2023 (military aggression of Russia from the beginning of 2022). To determine the threshold value of the indicator of the ratio of public debt to GDP, the construction of the Laffer debt curve is proposed. On the basis of retrospective analysis and modern challenges, key possible ways of improving approaches to the management of Ukraine's external public debt in the conditions of martial law are determined.