What Is Public Debt Management?

by NirupamaA

According to the International Monetary Fund, public debt management refers to strategies employed by a country's national authority to manage external debt. This includes loans given to a government by other countries.

Significance

The International Monetary Fund states that a national government is usually the largest financial borrower in an economy. A government must manage its debt portfolio to ensure that the country's capital market is always viable and that the economy's development and growth are at a satisfactory level.

Function

It is the function of debt managers in each country's treasury department to ensure that the government does not incur financial or economic setbacks. This includes making government authorities aware of financial liabilities and risks as well as consolidating beneficial terms of debt maturity, currency and short-term or floating rate of interest.

Considerations

The rate of globalization, market turbulence and technological advancement has increased the dependence of countries on one another. Borrowing from the private sector or from other countries in foreign currency has become common.

Warning

Disadvantageous terms, such as interest rate, loan duration and type of currency, can be contributing factors during economic crises.

Guidelines

Public debt management guidelines are established and reviewed annually by the International Monetary Fund. These guidelines encompass all domestic and external debt, including framing low interest rates and terms of loan maturity.

Photo Credits

  • Image by Flickr.com, courtesy of Andres Rueda