State Debt Management Research Articles

The rising cost of servicing public debt: challenges for fiscal policy in a crisis environment

The study is devoted to the challenges for the fiscal policies of Central and Eastern European (CEE) countries, resulting from the strong growth of public debt and its servicing costs under the conditions of the pandemic and war shocks. The purpose of the study is to answer the questions: i) what factors caused the sharp increase in sovereign debt yields? ii) is there a correlation between the degree of implementation of sound economic governance (SEG) principles and the cost of servicing sovereign debt? ii) how strong was the response of the sovereign deficit and debt to the shocks caused by the pandemic and war in Ukraine? iii) does the rising cost of servicing debt threaten the sustainability of public finances? v) do the adopted SEG principles remain relevant during periods of shocks? The study covered the 6 largest economies in this part of Europe, i.e. Poland, Romania, the Czech Republic, Greece, Hungary, and Slovakia, but its results apply indirectly to many other countries. The results were confronted with a plan for reforming the EU’s economic governance system in order to identify the fundamental challenges facing the countries studied in this context. On the basis of the study, recommendations were put forward for shaping the assumptions of the state debt management strategy and multi-year financial plans.

Macroeconomic factors and government bond yield in Indonesia

The issuance of bonds by the government attracts the interest of many investors, including foreigners. The government must understand the factors determining bond yields for managing government debt. This study aims to investigate the effect of domestic and global macroeconomic variables on government bond yields in Indonesia. The paper uses monthly data from November 2014 to December 2022. The research sample comprises government bonds with 5, 10, and 15-year tenor bonds. The GARCH (1,1) and GARCH-M (1,1) models are applied to estimate and analyze the determinants of government bond yields. Research findings reveal that Indonesian interest rates significantly affect the yield of 10- and 15-year tenor bonds. Inflation has no impact on bond yields across all tenors. The increase in foreign exchange reserves reduces bond yields in all tenors. The Indonesian stock exchange index is detrimental to long-term bond yields. The exchange rate has a positive impact on bond yields in all tenors. World oil prices significantly impact yields on 5- and 10-year tenor bonds. The Fed’s interest rate positively affects the yield on the 15-year tenor bond. The implication of these findings for the Indonesian government is the implementation of several aspects of economic and financial policies that can improve state debt management and financial market stability.

MANAGEMENT OF THE STATE DEBT OF UKRAINE IN THE CONTEXT OF BALANCING ITS ECONOMIC DEVELOPMENT

Introduction. Settlement of the state debt problem determines the country’s budgetary capacity, the situation of its currency reserves, the level of interest rates, the investment climate, the stability of the national currency, and the behavior of all segments of the financial market. At the same time, in modern conditions, there is no unified approach to the management of the state debt as a priority direction of the state financial policy, which requires the search for opportunities to fulfill the state’s debt obligations in order to form the goals of its balanced economic development, to intensify scientific efforts aimed at researching the above-mentioned problem. The purpose of the article is to systematize approaches to determine the features of state debt management and assess its consequences for identifying balanced development of the country. Results. The problems of increasing the state’s debt obligations, which lead to structural imbalances, increase the country’s financial dependence on foreign creditors, reduce its solvency and investment attractiveness and increase debt service costs, are studied. The analysis of the conditions of formation of the state’s debt obligations was carried out and an assessment of their consequences in the context of balancing the country’s development was carried out. The peculiarities of the change in the structure of the state debt of Ukraine in terms of repayment currencies have been revealed. The indicators of Ukraine’s debt burden were monitored and compared with the limit values in order to determine the level of financial threat to the country. The consequences of an inefficient mechanism of state debt management, which are revealed at the stage of servicing and repayment of the state debt and which lead to the need for annual interest payments financed from the budget, are singled out. The measures to improve the government debt management mechanism to prevent negative macroeconomic trends are substantiated. Conclusions. According to the results of the study, it was established that the state debt of Ukraine creates risks for the financial capacity of the state, and the further attraction of loan funds at insignificant rates of economic growth increases the threats to macro-financial stability. Therefore, to increase the effectiveness of state debt management, it is important to form a proper management mechanism, monitoring of debt security indicators and determine the optimal structure of the debt-to-GDP ratio, taking into account the main aspects and trends of development of the national economy. To improve the mechanism of state debt management, it is proposed to: reduce the share of debt denominated in foreign currency; increasing the share of domestic borrowing in the structure of the state debt; reduce the specific weight of debt that must be repaid in the short term; increase the demand for government securities; refuse to attract financial resources of international organizations, which provide for additional crediting conditions and limitation of economic and political dependence of the state.

Українські реалії реструктуризації суверенних боргових зобов’язань крізь призму історичної ретроспективи

Geopolitical challenges and socioeconomic upheavals, which intensified as a result of the armed military aggression unleashed by the russian federation, significantly complicated the process of forming the revenue part of the State budget and caused a significant increase in public expenditures, which led to a budget deficit and the inability of Ukraine to service its sovereign debt obligations in the form of Eurobonds. Therefore, there was a need to restructure sovereign debt obligations. The problem statement of the article includes determining the prerequisites and evaluating the prospects of restructuring Ukraine's sovereign debt obligations in wartime conditions. The aim of the article is to highlight the retrospective, current trends and to assess the prospects for reaching agreements with creditors in the process of restructuring sovereign debt obligations on favorable terms for the economy of Ukraine. General scientific and special methods are used: dialectical, system, comparative, historical, statistical, method of grouping, expert evaluations, predictions. The essence and significance of the restructuring of sovereign debt obligations in the external State debt management system is revealed. Attention is focused on the peculiarities of the restructuring of sovereign debt obligations in the conditions of wartime. The retrospective of the formation of approaches to restructuring during geopolitical disasters is analyzed. The foreign experience is systematized and the best practice of sovereign debt management is summarized. The prospects for the restructuring of sovereign debt obligations on favorable terms for the economy of Ukraine are substantiated. It is proved that geopolitical upheavals, such as wars, revolutions and the collapse of empires, are usually accompanied by significant write-offs of foreign debts. Historically, it has been confirmed that during wars and revolutions, the average discount (write-off) of the current value of the debt during restructuring reaches 98%. It is emphasized that the Government of Ukraine needs to reach the agreement of creditors regarding the write-off of 60% to 98% of the external debt in accordance with the best practices in the field of sovereign debt restructuring.

State debt assessment and forecasting: time series analysis

One of the pressing problems in the modern development of the world financial system is an excessive increase in state debt, which has many negative consequences for the financial system of any country. At the same time, special attention should be paid to developing an effective state debt management system based on its forecast values. The paper is aimed at determining the level of persistence and forecasting future values of state debt in the short term using time series analysis, i.e., an ARIMA model. The study covers the time series of Ukraine’s state debt data for the period from December 2004 to November 2020. A visual analysis of the dynamics of state debt led to the conclusion about the unstable debt situation in Ukraine and a significant increase in debt over the past six years. Using the Hurst exponent, the paper provides the calculated value of the level of persistence in time series data. Based on the obtained indicator, a conclusion was made on the confirmation of expediency to use autoregressive models for predicting future dynamics of Ukraine’s state debt. Using the EViews software, the procedure for forecasting Ukraine’s state debt by utilizing the ARIMA model was illustrated, i.e., the series was tested for stationarity, the time series of monthly state debt data were converted to stationary, the model parameters were determined and, as a result, the most optimal specification of the ARIMA model was selected.

State debt management in the context of Ukraine's economic development

The paper explores the theoretical and methodological basis of the concept of public debt management. The relationship between the problem of public debt and economic development of the country has been revealed. The dynamics of Ukraine's public debt for the period 2010-2019 have been analyzed. The default as a means of state debt policy has been investigated and its main economic consequences are presented. The international experience of managing public debt on the example of Argentina has been analyzed. The economic essence of technical default has been defined and the concept of technical default as a priority direction of Ukraine's state debt policy in the current conditions has been proposed. Public debt is a set of State commitments to internal and external creditors. State debt Management provides for state creation of the concept of debt policy. In economic terms, the main task of debt management is to maintain the level of public debt on a moderate level. In Ukraine, the problem of state indebtedness is particularly relevant after 2014. However, the most acute this problem was at the beginning of 2020 with the beginning of the recession economy and raising the deficit of the State budget. There are three main strategies to address public debt: investing in the country's economic development and timely repayment of liabilities, default and technical default. The strategy of investing in the country's economic development envisages emission of money or additional involvement in order to stimulate economic development, as well as timely payment of debts and interests. This strategy is appropriate in terms of relatively small amounts of public debt. Defaulted involves declaring the state insolvency payment obligations to creditors. Defaulted in the short run means a rapid deterioration in the economic situation in the country, but under certain conditions, there may be positive consequences in the long run. The technical default means the state's inability to pay debts on a certain date if there is a possibility of their payment in the future. In Ukraine today, the optimal decision of the state debt policy is the proclamation of technical default to restructure debts and prevent aggravation of socio-economic crisis in the country.

УПРАВЛІННЯ ДЕРЖАВНИМ БОРГОМ УКРАЇНИ

Public debt management and servicing is one of the top priorities for the country’s financial policy, and an important condition for the stability of its financial system. Due to the need of solving the problem of the state debt of Ukraine growth and the cost of servicing it, it is urgent to increase the efficiency of methods for managing it. Ineffective management of Ukraine’s government borrowings, which is mainly used to cover the budget deficit, leads to a decrease in the state’s economic security level and an increase in the burden on the budgetary sphere and an aggravation of the debt situation. The maintenance and management of public debt is inextricably linked with the pursuit of a balanced debt policy and minimization of the risks inherent in public debt. The economic and social development of the country, its stability during the period of economic crises and the post-crisis speed of recovery of the national economic system depend on the efficiency and effectiveness of this management. After experiencing a deep economic crisis in 2014–2015, economic growth began to recover in 2016, and the total public debt in relation to GDP also tends to decrease. This was caused by various factors: the deficit of the state budget and balance of payments, heavy dependence on energy imports, ineffective use of attracted loans and the lack of proper debt management. This article analyzes the existing features of the formation of an effective public debt management system in the context of improving the efficiency of Ukrainian debt policy. The proposed measures of an effective management strategy will contribute to the rational use of borrowings and create the necessary conditions for optimizing the debt burden. The main goals of state debt management in Ukraine were analyzed, as well as the world practice of analyzing public expenditure and financial accountability was considered. The existing problems in the state debt management of Ukraine are identified, practical recommendations are provided for future development of the most effective scenario for solving Ukrainian debt problems. The forecast of public debt was calculated on the basis of a linear regression equation model, and the macroeconomic factors that have the biggest impact on the growth rate of public debt were determined.

State Government Use of the Same Underwriting Firm and the Impact on Borrowing Costs

Repeated use of the same underwriter can have a significant impact on issuance costs. On the one hand, an issuer may accumulate relevant information from using the same underwriter for multiple issues, which can reduce information costs and lower borrowing costs. On the other hand, repeated use of the same underwriter can raise borrowing costs if organizational learning is limited and the issuer and underwriter together continue with previous errors in issuance strategy, leading to greater risk-taking and more inefficiency. Despite its importance, existing research on repeated use of the same underwriter in municipal debt issuance is limited because prior work ignores non-linear effects on municipal borrowing costs. This article draws from theories on transaction costs, relationships, and organizational learning to test hypotheses about the non-linear impacts of repeated use of the same underwriter on municipal borrowing costs. the article analyzes data on California state general obligation bonds using a menu of estimation techniques. A key finding is that after a critical threshold, borrowing costs tend to decrease as the state government repeatedly uses the same underwriter in debt issuance. the study enriches existing knowledge on the interdependence between issuers and underwriters and presents useful insights for state debt management programs.

Проблемы укрепления доходного потенциала региональных бюджетов в России на примере Калужской области

Статья посвящена изучению особенностей формирования доходов российских регионов на примере Калужской области. Предметом исследования является социально-экономическое и финансовое положение Калужской области.Целью работы является выявление возможных социально-экономических и бюджетных рисков субъекта, влияющих на доходный потенциал региона. А также выявление дополнительных резервов для повышения доходной части бюджет субъекта.В работе раскрыты наиболее актуальные проблемы покрытия расходов и управления долгом, проведена оценка бюджетного потенциала региона с помощью методов статистического анализа, а также посредством расчета показателей эффективности бюджетной политики.Изучен доходный потенциал региона в части налоговых доходов как основного источника формирования бюджета региона. Оценены изменения в расходной части бюджета. Изучена долговая нагрузка субъекта и риски, связанные с изменением объема и структуры долга, а также методы управления государственным долгом.Авторами предложены рекомендации, направленные на повышение доходного потенциала региона с учетом его особенностей и текущей экономической ситуации, которые могли бы быть использованы при разработке бюджетной политики субъекта.Доходный потенциал регионов находится в сложном положении, поэтому субъектам следует мобилизовать все свои силы на его укрепление. В свете риска снижения доходов от налоговых поступлений требуется развивать малое и среднее предпринимательство, которое обеспечивало бы население необходимыми продуктами и услугами и создавало рабочие места. Для этого необходимо активнее внедрять государственно-частное партнерство, максимально облегчать ведение бизнеса путем введения налоговых льгот и ускорения и упрощения бюрократических процедур. Также нужно снижать долю непроизводительных расходов и наращивать производительные, что приведет к повышению эффективности бюджетной политики региона. Комплексное решение данного вопроса в настоящее время приведет к мощному положительному эффекту для всей экономики региона в долгосрочном периоде.

Naujas finansų vadovėlis

In 2006 the publishing house “Kaunas Technologija” published the textbook “Public Finance” by E. Buskeviciūtė. Textbook is ded icated to bachelor and master students of social sciences studies and employees from different enterprises and organizations. The textbook consists of introduction, seven chapters, author’s final word, abbreviations, index, appendixes and English summary. The work consists of 442 pages, 417 references, 141 picture, 41 table and 27 graphic appendixes. The textbook is important for its information systematisation, possible broad application. The textbook deals with complicated state financial relations in various aspects referring to scientific works of various Lithuanian and foreign authors, also statistics and normative information. The structure of the book ”Public Finance” is logically purposeful, the information is well systematized, consequently arranged, using unified and methodically based scheme. At the end of every chapter there is a wide list of questions, tasks and cases, which would inspire students and practitioners to get interested in state monetary relations with contemplation and creativity. The first chapter of the texbook presents a short development of finance, finance conception. The second chapter reveals state finance system links, state treasury system. Third, fourth and fifth chapters broadly analyse state budget system, fiscal policy, tax system, insurance activity. Chapter six describes state debt management, and chapter seven presents state finance control system. The Textbook ”Public Finance” is aimed at improving st udents’ education quality, as well as helping practitioners to take finance management decisions.

The Impact of State Debt Management on Debt Activity

This article addresses the impact that state debt management has on the debt activity of a state debt program. A quantitative measure of state debt management is developed and used in analysis of state debt activity. The study finds that states with decentralized debt management issue more long‐term debt as compared to states with other forms of debt management. The study also investigates the impact other institutional variables have on state debt activity and highlights the interaction effects of these variables with the institutional debt management variable. The study finds that the effects of previously tested variables such as the number of public authorities and constitutional debt limitations on debt activity are altered if the form of debt management is considered.

State Debt Management Policy: A National Survey

The amount of outstanding, long‐term, tax‐exempt state debt has grown precipitously over the last decade, from $87 billion in 1977 to $264 billion in 1987. But there have been few attempts to carry out broad studies of basic state debt management policies, using comparative state data. As a result, policy‐makers lack guidance as they attempt to adjust policies and procedures to meet the rapidly evolving requirements associated with public borrowing. This paper reports on a national survey of state debt manage ment policies ‐ policies devoted to the planning, preparation, sale, and repayment of debt for which states consider themselves responsible.