Information about Public Debt
What is Public Debt:
Public debt is a type of debt what is owned by the Government or its any branch. It is a method of financing the government project by borrowing money by issuing notes, securities government bonds, bills etc. Usually these kinds of borrowings are taken by govt. with a fair rate of interest.
National debt is a debt which a state owes to its subject or the nationals of others countries. – Findlay Shirras.
Importance of Public Debt:
Importance of public debt is given below:
- To assemble additional expenditure.
- In case of emergency or to fight contingencies.
- To undertake public work programs.
- To create job opportunities.
- To get rid from the vicious circle of poverty.
- To check depression.
- To fight inflation.
- To help finance of public experience.
Burden of Public Debt:
There are always two sides in a coin. It is important also it has a burden. The burden of public debt is 3 types:
- Internal Debt/ External Debt (Productive).
- Internal Debt (Dead weight).
- External Debt (Dead weight).
1. Any Debt used to finance productive project, in most cases where return from the project may cover interest and repayment of principle does not impose burden to the community.
2. a) Direct money burden is measured by sum of money payments, for interest and repayment of principle to external creditors.
b) Direct real burden is measured by the loss of economic welfare which these payments involve to members of the debtor community.
3. Direct real burden will very according to the proportion in which various members of the community contribute to the required money payment.
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