State credit is a set of economic relations in which, on the one hand, the Russian Federation, a subject of the Russian Federation, a municipal entity acts as a lender, borrower, guarantor, and on the other hand, legal entities or individuals, foreign states, international organizations and their individuals and legal entities.

State credit, as an economic category, stands at the junction of 2 types of monetary relations (finance and credit). As an element of the financial system, state credit participates in the formation and use of centralized monetary funds of the state, namely, the budget and extra-budgetary funds. At the same time, the process of generating and managing funds is carried out on a temporary and repayable basis.

The connection between state credit and finance is that, firstly, these are distribution relations, relations of secondary distribution of GDP. Secondly, one of the participants in these relations is certainly the state. Thirdly, the purpose of these relations is to attract additional financial resources by the state. Differences between a state loan: it is repayable and reimbursable; it involves two-way movement of funds, unlike taxes; is voluntary; limited in duration (30 years); has a situational and selective nature. The Russian Federation, like most states, acts as a borrower. A guarantor is someone who guarantees the lender that the borrower will repay the funds in a timely and complete manner.

Functions of state credit :

fiscal (distribution).

regulating.

control.

Through the fiscal function, the formation of centralized monetary funds of the state is carried out, acting as a borrower through the issue and placement of government securities, the state provides itself with additional funds to finance its expenses. This happens when there is a budget deficit. In this way, the state increases budget revenues and pays off the deficit; the positive impact of a state loan is that with its help the tax burden is more uniform over time. Taxes that are levied during the period of financing expenditures through government borrowing do not increase, which would have to be done without using government borrowing. But then, when the loan taken must be repaid, taxes are levied both to pay and to repay the interest on it. All over the world, the refinancing procedure is widely used to pay off debts on a government loan (this is the issue and placement of new government loans to pay off debts on already issued ones).

State credit is one of the most effective tools for regulating the economy in the hands of the state, and by entering into credit relations, the state actively influences the state of money circulation, the size of the money supply, and the level of rates on the loan capital market. By consciously using state credit, the state can pursue one or another financial policy. By placing its securities among individuals and legal entities, the state reduces their available funds, thus reducing the money supply. Usually the state does this when it wants to reduce effective demand and thus reduce inflation. When the state wants to increase the amount of money in circulation, it buys up its securities. In addition to the money supply, the state takes free financial resources from the loan capital market. The loan capital market includes part of the securities market and part of the banking system. When the state enters the loan capital market, it reduces or increases the demand for credit and thus affects the price of credit. The more funds from this market are diverted to government needs, the less is left to satisfy other needs and therefore the loan becomes more expensive. When there are signs of inflation, the state strives for restriction (reduction, contraction of credit). Using funds obtained through the placement of government loans, the state can create new jobs. The state can provide loans to those enterprises in whose activities it is interested.

The control function of state credit is related to the control function of finance, and follows both from the nature of credit and from the functions of the state. The control function of state credit is closely related to the activities of the state and the state of its centralized fund of funds. This function controls the movement of value bilaterally, since government credit is based on the principle of repayment. In addition to financial structures, the control mechanism also includes credit structures, but if they talk about what exactly is controlled, then there are 3 points :

targeted use of funds.

compliance with return deadlines.

compliance with payment discipline (timely payment of interest).

Depending on who the other party is, a distinction is made between internal and external government credit. Internal government credit exists in the following forms:

1) The issuance of loans, this form is characterized by the fact that temporarily free funds of individuals and legal entities are attracted to finance public needs (to cover the budget deficit by issuing and selling government securities). All government securities are of a debt nature. The main form of government securities is bonds; they can be classified according to many criteria:

Term (short: up to 1 year, medium: from 1 to 5 years, long: from 5 to 30 years)

According to the income payment method (interest - coupon, discount - sale at a discount from the nominal, and return at nominal, winning - not every owner receives income, but only some)

By placement method (voluntary, forced - salary is issued through loans).

2) The conversion of part of the deposits into government loans is implemented through the Sberbank system. Most often implemented in a totalitarian state, where the state keeps banks under control. The state receives a loan from part of the deposits without the knowledge of the population.

3) Borrowing funds from the national loan fund. This is a form in which the central bank transfers part of the loan funds directly (without accompanying this operation with the purchase of government securities). This form exists in a totalitarian state.

All 3 forms are united by the fact that the state acts as a borrower.

4) Budget loans are a form in which the state acts as a creditor. This is a form of state assistance to legal entities on the principle of repayment, urgency, and payment. The total amount of funds allocated to the budget is limited. Only those in whose activities the state is interested can count on a loan. Budget loans do not have a commercial purpose, but are a means of supporting the most important enterprises for the economy. When the budget is being reviewed, the goals, conditions and limits of the budget loan are approved.

5) The state acts as a guarantor. The government guarantees loans issued by lower authorities and management, as well as individual enterprises that the state wants to support. The law for next year establishes the upper limits of state guarantees in the currency of the Russian Federation and in foreign currency. The amount of guarantees previously issued by the Russian Federation is called public debt.

Modern external loans have the purpose of providing food assistance. Most often, these loans are provided by international financial institutions. When the state acts as a borrower, public debt is created. Public debt is divided into current and capital. Capital – the amount of issued and outstanding debt obligations, including accrued interest. Current – ​​expenses for paying accrued interest and repaying those obligations that fall due in the next year. Public debt, by definition, is the amount of budget deficits accumulated over a certain period of time minus the positive balance.

The heaviest debts are short-term. An increase in internal debt is always less dangerous, along with external debt. It is easier for the state to agree with its own individuals and legal entities on refinancing. When the external debt is repaid, the ND “flows” to another country.

Budget deficit and public debt are closely related. First, by definition, public debt consists of budget deficits. Government loans are the most important sources of covering the budget deficit, because they determine each other. The size and dynamics of public debt affect the degree of danger of a budget deficit. Unpleasant consequences from the growth of domestic public debt:

consumption and savings decrease.

the growth of domestic debt increases interest payments on it; all payments on the public debt increase budget expenditures.

interest payments on government debt increase income inequality.

Debt repayment comes from budgetary funds, and budgetary funds are generated by collecting taxes, and everyone pays taxes. If the payment of interest is made by increasing tax rates, then this undermines the effect of economic incentives for the development of production and reduces the interest in investing in production. Paying off debt through new borrowings on the capital market increases interest rates on the loan. If payments on external public debt amount to more than 20%-30% of receipts from foreign economic activity, then the country becomes a chronic debtor.

Payment of debts can also occur at the expense of gold and foreign exchange reserves. In relation to external debt, consolidation is used - the transfer of short- and medium-term debts to long-term ones. If the state does this easily with internal debt, then with external debt it is necessary to negotiate. Another way to reduce external debt is by turning it into long-term foreign investment. The creditor receives real estate in the debtor country - participation in the capital, in this case, interested firms issue a debt obligation of the debtor from their state or bank and, on account of this obligation, acquires property in the debtor country.

Banks, loans, deposits

For a country, a state loan is one of the ways to attract funds for its needs. So government loans are part of the entire system of public finance. Almost every country has a need to attract additional financial resources with limited amounts of tax revenue and other income. So, in addition to gratuitous receipts of resources (such as taxes), the state also attracts funds on a repayable basis, using the form of state credit: both external and internal.

The state in these economic relations can act as a borrower, guarantor, or lender.

If the state assumes responsibility for repaying the loan or fulfilling other obligations, it becomes the guarantor. And if the debtor fulfills its obligations on time and in full, then the guarantor will not have to bear additional costs. However, government guarantees are often needed by unreliable borrowers, which means that centralized monetary funds have to bear the costs.

A state loan, like any other, is distinguished by payment, urgency and repayment. However, a state loan differs from a bank or commercial loan in the type of collateral. Bank or commercial loans are secured by some kind of valuables. When the state borrows money, the security is its entire solvency, all its property or income.

There are three reasons why it is difficult for the state to do without state credit in its economic activities:

Cash gap of the budget, that is, the time difference between the time of receipt of funds into the budget and their expenditure;

The presence of a budget deficit also leads to the need for government credit;

Increasing orientation of the economy towards the social sphere, increasing investment in environmental protection, that is, processes requiring increased government spending.

Typically, government loans are voluntary. Although, of course, there are exceptions. For example, after World War II, the population was required to subscribe to government bonds, the purpose of which was to raise funds intended to restore the national economy after the war. Forced loans, as a rule, take place in states with a totalitarian regime.

How is government credit used?

The state uses it in search of resources to finance the country's expenses, to regulate processes in macroeconomics and microeconomics, in order to influence social and monetary policy.

Two types of government credit - external and internal - have their own characteristics. The concept of external credit is closely related to the external debt of the state. But internal means the debt of the state in relation to persons within the country. Even a situation where the state did not have time to transfer salaries or pensions to social workers or vulnerable groups of the population is a state loan. State credit also includes government borrowing funds from commercial banks and issuing government debt obligations - securities with a certain maturity.

Previously, we considered situations in which the state acts as a borrower, but it can also be a lender. For example, the state can lend to local authorities, organizations, enterprises, and can also issue them loans on preferential terms. In addition, the state can provide external loans.

Educational and methodological manual for self-preparation for practical classes (in questions and answers).
Taganrog: Southern Federal University, 2007

4. CREDIT SYSTEM

4.1. ESSENCE, FORMS AND FUNCTIONS OF CREDIT

What is a government loan?

State loan- this is a set of economic relations between the state represented by its authorities and management, on the one hand, and individuals and legal entities, on the other, in which the state acts as a borrower, lender and guarantor.

If the state assumes responsibility for repaying loans or fulfilling other obligations undertaken by individuals and legal entities, then it is guarantor.

Acting as a borrower, the state influences the size of centralized monetary funds. Credit relationships in which the state acts as a guarantor do not necessarily lead to such a change. If the debtor fulfills its obligations in a timely manner and in full, the guarantor does not bear any additional costs. But most often, government guarantees apply to unreliable borrowers and lead to the expenditure of centralized funds.

State credit is one of the types of credit, characterized by urgency, payment and repayment. Funds are raised by the state for a specific period. After a certain period of time, the borrowed amount must be repaid with interest.

State credit differs from such basic forms of credit as banking and commercial by collateral. When providing a bank or commercial loan, some kind of valuables are usually used as collateral. When borrowing funds by the state, the collateral is the entire solvency of the state, all property owned by it, the property of a given territorial unit or any of its income.

There are at least three reasons why the economic activity of the state is impossible without state credit:

1) the presence of a cash gap in budget execution, i.e., a difference in the time of receipt of income to the budget and the making of expenses;

2) state budget deficit;

3) strengthening the social orientation of the economy, increasing costs for environmental protection, which requires an increase in government spending.

State credit is one of the types of attracting financial resources from the state to implement options.

In fact, this is an element of the state financial mechanism. Since govt. the party almost always needs to raise additional funds, and the amount of taxes has certain limitations.

Consequently, the monetary system is often supplemented by repayable loans in the form of external and internal government loans.

The concept of government credit

Acting as a powerful agent of the economy, owning a large amount of money, the state acts as a debtor and creditor at the same time. In addition to this, it is a guarantor of loans from economic entities in which the government is interested.

In fact, the term in question represents one of the effective means of regulating economic development by the state. It is of particular importance for regulating financial circulation, determining the level of interest rates and the rate of currency fluctuations.

The occurrence of the phenomenon under study is a clear consequence of the budget deficit. If its own revenues are insufficient, the government usually has two sources of replenishment and renewal: the auxiliary process of issuing finance and attracting loans to the market.

The need for a loan is objective, and it is associated with a likely imbalance of costs and revenues, which is covered by the loan. In order to compensate for deficits in the state budget, the interaction mechanism under consideration is usually used.

The presence of a small deficit is a kind of incentive for growth in the market economy. It is natural to ask whether there is a need to finance the deficit in principle? After all, with low expenses, this is only an incentive to improve economic activity and national growth. farms.

But this can only be useful in small doses; in other situations there is an urgent need to regulate it. Public credit usually occurs in the form of loans acquired from individuals and legal entities.

Functions of state credit

The concept under consideration is a set of economic relationships, the formation of which occurs between the authorities and management structures, and, on the other hand, companies and ordinary citizens.

Here the role of the state is reduced to the borrower, and it also acts as a guarantor and lender. If the debtor makes payments on its obligations on time, then it does not bear specific costs.

In the modern market, reliable borrowers do not need the services of a guarantor, since they have the ability to independently raise funds on the credit market.

As a category of the economic sphere, a loan of this kind is at the intersection of two forms of financial relationships - direct funds and loans, combining their subtleties and nuances.

In terms of one of the links in the financial system, the formation and use of public funds is serviced. As one of the forms of loans, a state loan has a large number of features that distinguish it from standard categories, for example, from taxes, fees, and charges.

Such debt has several significant and significant differences from other types of lending.

If, in the course of its provision, certain values ​​act as collateral - commodity items in warehouses, unfinished production lines, then in the process of borrowing funds from the state, all property in possession, as well as income, is used. Based on the central government branch, such loans do not have any expressed purpose.

Acting as a special financial category, this element has three key options: distribution, regulation, control.

In the first case, money is created centralized by the fund and used on the principle of payment and urgency.

In the second situation, the state carefully regulates financial circulation through the placement of loans among various investors. In the third situation, in the process of performing the control function, it is implied that the state provides comprehensive control over the relationship.

Features of the state loan

State credit acts as one of the types of movement of loans and funds that have temporary freedom and belong to the ordinary population, enterprises, and other market entities.

In the process of forming this type of mutual relationship, the lender and the borrower, who are legally solvent, take part.

If we consider government structural elements that can easily take part in this process, then among them we can highlight:

• Cabinet of Ministers;
• Local government;
• National bank;
• Min. Finance

From another position, creditors enter into credit relations, whose roles can be:

• banks;
• insurance organizations;
• joint stock companies;
• individuals.

The task and role of the latter group is to provide credit to the state on the basis of certain obligations. The relationship boils down to the fact that representatives of the latter category buy up securities and property that representatives of the first group have.

Classification

To understand this aspect in more detail, it is necessary to take into account several basic types of government loans. State credit can be divided into several basic types.

Firstly, it can be internal and external in nature. If we talk about the internal type of lending, it has the following directions and capabilities:

• borrowing in the form of a loan;
• mobilization of finances;
• treasury type loans;
• borrowing;
• loan fund.

Based on the right of issue, state and local loans can be distinguished. In the first case, we are talking about the fact that the securities are subject to issue by the central government bodies, and the proceeds go to the central budget.

In the second situation, the release process is carried out by local authorities, and then there is distribution to the appropriate local budgets.

In practice, one can also consider borrowed funds of a market and non-market nature. The bonds associated with these loans are subject to a free process of purchase and sale.

Government loans are classified into those that include collateral and those that do not. In the first situation, there is a reflection of the key principle of lending - material security. In the second situation, it is absent, so the degree of reliability can be determined by the level of authority of the state party.

According to the characteristics of the holders Several groups can also be distinguished. Some of them can be sold exclusively among the population, others - only between companies, and others are universal.

Based on the deadline provided to repay the debt, short-, medium- and long-term options can be considered. In the first situation we are talking about a period of up to a year, in the second - 1-5 years, in the third - from 5 years.

Depending on the variation of payment actions By income, government loans can be classified as interest-bearing, winning, discount, interest-free. In the first case, profitability is represented by interest on the loan.

With winning loan options, payment of proceeds occurs on the basis of drawings. An interest-bearing loan involves the payment of income in several types.

As for the discount loan, it involves the acquisition of government. papers at a discount. And an interest-free loan involves financing certain projects within the framework of emergency situations.

One-time and partial payments can be distinguished. In the first case, the debt is formed at the end of the loan term.

In the second situation, three key options can be used:

• repaying the loan in equal installments over several annual periods;
• repayment is carried out in constantly increasing amounts;
• The amount of the contribution is subject to constant reduction.

Based on placement direction, borrowing can be classified as voluntary, forced, placed on the basis of subscription. In the case of voluntary provision, each buyer has the right to make his own choice as to whether or not to buy securities.

If we are talking about forced placement, there is pressure on the potential buyer from the state. If we are talking about the third situation, then traditionally the placement of loans occurs according to an approved list.

Based on the obligations of the state, related to compensation of a debt obligation, one can distinguish between loans with and without the right of early repayment. In the first case, the state party has the right to take into account the situation within the framework of existing market relations.

Based on legal registration Bond and reverse type loans can be distinguished. In the first case, we are talking about an incidental issue of securities. In the second situation, formalization occurs through the creation of contractual agreements.

Another characteristic form for domestic lending is the mobilization of a share of deposits and borrowings through state banking systems. There is a transfer of money to part of budget revenues. But traditionally, such banks, regardless of their form of ownership, operate on a commercial basis in order to make a profit.

By type of participants It is possible to distinguish between international credit and a loan within one state. That is, the principle of payment, urgency, repayment, and limitation applies here.

Any financial borrowings and obligations are made either in the currency of the lender's country, or in the equivalent of the borrower's currency, or in the money of a third state.

This approach is aimed at creating favorable conditions for attracting funds. Thanks to the large number of forms, it is possible to easily take into account the various interests of individuals and legal entities.

Conditions of receipt

The term in question represents a system of relationships that arise between the state party, represented by government and administrative bodies, and legal entities and individuals. Here it is the first subject who takes on the debt obligation, and he gets the role of guarantor and creditor.

The state part, in the form of an authorized relevant body, is engaged in concluding a loan agreement, within the framework of which a corresponding requirement or obligation arises. On this basis, he is required to comply with certain conventions.

The following factors and indicators are taken into account:

1. Submission deadline. It is determined based on what needs the borrower has and what he can count on in this regard. Also, everything depends on the favor of the lender. This period ranges from one annual period to 5-10 or more years.
2. Obligations of the parties. As part of the agreement, it is stated that the lender undertakes to provide the borrower with such and such an amount, and he, in turn, has an obligation to repay the debt under certain conditions. At the same time, auxiliary obligations are stipulated, which must be taken into account by the parties.
3. Conditions under which debt repayment is ensured. You need to decide on the size of the regular payment and the general scheme of repayment activities. There is also a set of key requirements for both parties that must be met.
4. Interest rate. It depends on individual circumstances and is most often determined by the current economic situation in a particular market.

Thus, a state loan is a large and important obligation formed between the parties in the process of transferring a certain amount of money for use.

This is not the entire list of conditions on the basis of which the state can receive a loan. But here are the main points that require close attention.

Forms and directions of functioning

To study the concept in even more detail, it is worth taking into account several principles of its functioning.

• Government loan. These financial resources may belong to both the population and numerous organizations. They are required to meet the social needs of society and to solve other problems of special strategic importance.
• Partially, such deposits are beginning to be of a state nature, so banking structures are ready to provide loan funds to the government side using borrowed resources. At the same time, the true owner of the money has no idea about the key areas of its use.
• Another principle is to borrow funds from the national mass. In this situation, an issuance occurs in order to cover expenses. Moreover, these transactions are not mediated by the acquisition of securities.

The process of managing government debt involves a set of measures that are associated with payment and return transactions of various types.

There are a large number of forms and directions of the concept being studied that must be taken into account. All of them deserve optimal and loyal treatment and detailed consideration.

Debt management

This concept means a list of actions that are directly related to preparation for the issue and placement of debt obligations.

There are several key areas to consider when managing public debt:

• Payment of income in accordance with loans and their repayment through budgetary directions.
• Activities related to the refinancing and restructuring of public debt. Here we can talk about the possibility of paying off old debt by creating new loans.
• Carrying out winning draws and repayments within winning and interest-bearing loans.
• Conversion. In this situation, it is worth talking about changing the yield on loans to further reduce the costs associated with managing public debt by reducing or increasing interest rates.
• Consolidation. In this situation, we are talking about increasing the service life of loans that have already been issued.
• Unification. This is the process by which multiple loans are combined into one value in a process whereby the bonds on old loans are exchanged for new loans. This approach leads to a reduction in the number of types of securities that are traded on the market.
• Providing a deferment on loan repayment. This situation implies that paying interest and securing loans that were previously created may imply a change in repayment terms.
• Cancellation of a debt obligation. In this situation, we are talking about a complete waiver by the state of the obligation associated with the issued loans, if it suddenly faces financial difficulties in the form of bankruptcy, as a result of the arrival of new authorities who will refuse to recognize previous debts.

Thus, public credit is a set of relationships between different parties that must be regulated.

Types of External Debt Obligations

If we consider the picture in the Russian Federation, it can be noted that debt obligations have several fundamental areas.

1. Debt incurred as part of a relationship with foreign governments. This also includes obligations that are subject to guarantees from the authorities of foreign states.
2. External debt to foreign commercial entities. In this case, it is understood that debt obligations act as an object of purchase and sale in the global market space.
3. Formed debt in relation to foreign trade associations associated with the functioning of centralized import supplies. Registration of such a debt part occurs in the form of bills of exchange, which are guaranteed by the government.

The main creditors in our country are financial institutions, which, in the process of providing borrowed resources, set out the requirement for a specialized stabilization program aimed at reducing inflation and the budget deficit.

Structure of the country's domestic credit

As already noted, internal government credit includes loans from the state from individuals and legal entities.

An internal loan can be presented in several basic forms:

1. issue of special securities;
2. cooperation with the central bank;
3. taking loans from commercial structures.

The classification areas of government internal loans deserve special attention.

They can be divided into the following categories:

• Based on the right of issue or subjects of relationships. Such finances can be allocated by central or local authorities
• Based on the holder’s attribute, they can be, as already mentioned, universal or personalized (only for citizens or only for companies).
• Based on the form of income - winning, interest, coupon, zero transactions.
• By the presence of security for a state obligation - with or without a mortgage.
• The methods for determining the income level are bonds with fixed income and variable income.
• According to the obligations of the borrower - with or without the right to repay for a long term.
• Based on circulation on the market – market and non-market type securities.

The concept of government credit assumes that such a set of obligations is the “skeleton” of the country’s public debt and is combined into a special sector of the funds and securities market.

The key feature of the latter elements is their ability to combine the basic properties of various instruments.

Traditionally, government debt securities consist of bonds, but based on a set of criteria, they are divided into certain groups:

1. issuer - the person who issued the documents, this could be a municipality, government party, state-owned enterprise, financial corporation;
2. urgency - loans can be of any duration, as well as securities with their validity;
3. holder - papers in this situation can be bearer and registered in nature;
4. method of issue: documentary values ​​in cash or non-documentary options in non-cash form;
5. the purpose of the release measures: covering shortages, financing investment projects, ensuring the implementation of social services. programs;
6. forms in which income is generated - winning, discount, interest directions;
7. placement options: auction events, sales through open auctions, individual transactions.

Securities that are produced by a government party to meet shortages and subsequently finance expenses are called government items.

A bond is an issue that helps secure the holder’s right to purchase a bond within a certain period at a certain price and interest.

Thus, the formation of internal credit relations in the country affects the overall economic picture and helps improve the quality of life of the population, raising the level of social and other spheres.

A competent approach to this process will ensure a decent supply of funds at all levels of economic development.

Conclusion

A loan to the government is a separate line of transactions between a government party and a lender. In order for all the principles of this relationship to be respected, it is necessary that each party ensures a careful approach to compliance with the requirements put forward to it.

The state is not only a borrower, but also a guarantor of the reliability of transactions. Any parties can act as creditors - enterprises, individuals, commercial banking structures.

The more carefully the set of these transactions and operations is prepared, the better the loan result can be counted on.

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Thus, it follows that a loan provided to the government side is a set of financial resources aimed at financing the needs of the government part.

There are several key principles that must be followed in the process of forming this relationship. They will allow you to achieve optimal results and benefit each participant in the process.

Borrowed funds are attracted not only by individuals, enterprises, but also by government bodies. A form of lending in which the government acts as a borrower or guarantor is called a government loan.

Lenders can be individuals, legal entities or other countries. The amount of debt on such loans is included in the total public debt.

Functions of government loans

Government loans allow more efficient redistribution of funds between sectors of the economy. Such borrowings play an important role today, as they make it possible to ensure the implementation of large projects, and also serve as one of the sources of filling the budget.

Among the main functions of government loans are:

• repayment of the budget deficit not related to inflationary processes;
• mobilization of temporarily available funds for their effective use and meeting the needs of the country;
• regulation of the economy and monetary system.

It is also possible to highlight the control function of government loans, since in the process of implementing credit programs there is a need to control the distribution of funds and their intended use.

Types of government loans

Government loans are classified according to different criteria, among them the main ones can be distinguished.

Depending on the borrower

• central bank;
• governments;
• local executive authorities.

By debt capital markets

• external - attracted outside the country;
• internal - attracted within the country.

According to the form of loans

• issue of securities;
• conclusion of a loan agreement.

The issue of government securities is one of the most common forms. Depending on the period for which these securities are issued, they are divided into short-, medium- and long-term. For short-term ones, the circulation period does not exceed a year, for medium-term ones - from 1 to 5 years. Long-term equity securities are issued for a period of more than 5 years.

Conditions for raising borrowed funds by the state

The state has a large number of opportunities to attract borrowed funds. It creates the most comfortable conditions for investors and provides firm guarantees. Therefore, government lending is attractive to many lenders. And although this form of lending does not bring high income, the risk of losing your capital is almost zero.

The state can borrow money to meet its own needs or attract investors to finance serious projects. Moreover, it can act not only as a borrower, but also as a guarantor.

If, on the one hand, government loans can bring a lot of benefits, on the other hand, they require special control. This applies to every stage, from raising funds to repaying debt.

When attracting government loans, they are guided by two principles:

• the cost of borrowed funds should be minimal;
• government debt securities are among the most stable.

Additionally, to carry out a transaction to issue a government loan, the following conditions must be met:

• creditors trust the state;
• availability of sufficient available funds from creditors;
• investor interest in lending to the state;
• the ability to repay the loan on time and in full;
• guarantees for the investor.

In practice, the main conditions are the availability of available funds and interest in the project. Lenders trust the government more than other borrowers. In addition, the state provides significant guarantees, which helps minimize risk.