Government Budgeting Debt
The government budget can be described as a document presenting the anticipated tax revenue and expenditures for the coming financial year. However, in most cases, the governments are not able to finance their budgets. Thus resulting in finding means to finance the budgeted expenditure (Martell & Guess, 2016). The method used to finance government budgets includes taxing, borrowing, and printing of money. The government may borrow internally or externally. The standard internal debts are public debt and intergovernmental debt (Government Budgeting Debt).
The government issues bonds to acquire extra funds required to finance the budget; these bonds’ buy include the country’s citizens, foreign governments, and international investors. On the other hand, the government borrows from different government departments such as social security funds and parastatals. Externally government can finance its budget deficit through loans from other international monetary organizations, such as the World Bank and International Money Funds (IMF) (Mankiw & Elmendorf, 2018).
As Martell & and Guess (2016) argue, most governments across the world have borrowed either internally or externally. However, uncontrolled borrowing would hurt the country’s economic growth, such as borrowing to finance recurrent expenditures, including salaries of public workers. The government should ensure that the tax can cover its recurrent expenditure. The borrowed funds should be channeled to development projects that would have an economic benefit to the country (Elmendorf & Mankiw,2019)(Government Budgeting Debt).
On the other hand, training or access to education for the country’s population is a long-term method that a government can use to avoid future government debt. For instance, when most of the population has access to education, the country is expected to have a high working population, growth of business, and expansion of markets, leading to economic growth (Martell & Guess,2016) (Government Budgeting Debt).
For a government operating in such a population set-up, the taxation revenue is enough to finance its budget. Also, in the short term, if there is adequate training on financial institutions, the government would identify the best method to reduce the government’s borrowing rate and service the existing debts efficiently (Government Budgeting Debt).
Elmendorf, D. W., & Mankiw, N. G. (2019). Government debt. Handbook of macroeconomics, 1, 1615-1669.
Mankiw, N. G., & Elmendorf, D. W. (2018). Government debt. National Bureau of Economic Research.
Martell, C. R., & Guess, G. M. (2016). Development of Local Government Debt Financing Markets: Application of a Market‐Based Framework. Public Budgeting & Finance, 26(1), 88-119.