There is third mean of public loan i.e. other liabilities
Internal borrowings
Internal debt or domestic debt is the part of the total government debt in a country that is owed to lenders within the country. Internal debt’s complement is External Debt. Commercial Banks, other financial institutions etc. constitute the sources of funds for the internal debts.
Internal Public Debt owed by a government (Money a government borrows from its citizens) is part of the country’s national debt. It is a form of fiat creation of money, in which the government obtains finance not by creating it de novo, but by borrowing it. The money created is in the form of treasury securities or securities borrowed from the central bank.
External borrowings
External debt is the portion of a country’s debt that was borrowed from foreign lenders including commercial banks, governments or international financial institutions. These loans, including interest, must usually be paid in the currency in which the loan was made. In order to earn the needed currency, the borrowing country may sell and export goods to the lender’s country.
A debt crisis can occur if a country with a weak economy is not able to repay external debt due to the inability to produce and sell goods and make a profitable return. The International Monetary Fund (IMF) is one of the agencies that keep track of the country’s external debt. The World Bank publishes a quarterly report on external debt statistics.
If a nation is unable or refuses to repay its external debt, it is said to be in sovereign default. This can lead to the lenders withholding future releases of assets that might be needed by the borrowing nation. Such instances can have a rolling effect, wherein the borrower’s currency collapses and that nation’s overall economic Growth is stalled.
External debt, particularly tied loans, might be set for specific purposes that are defined by the borrower and lender. Such financial aid could be used to address humanitarian or disaster needs. For example, if a nation faces severe famine and cannot secure emergency food through its own Resources, it might use external debt to procure food from the nation it received the tied loan from. If a country needs to build up its energy Infrastructure-2/”>INFRASTRUCTURE it might leverage external debt as part of an agreement to buy resources such as the material to construct power Plants in underserved areas.
Multilateral debt is the money India owes to international financial institutions such as the Asian Development Bank (ADB), the International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD), the International Fund for Agricultural Development (IFAD) and others. Borrowing from the International Monetary Fund (IMF) are not included under multilateral debt, and are instead classified separately under the IMF head. As on 31 December 2017, India had a total multilateral debt of $56,021 million. The country’s major creditors are the IDA (53%), ADB (25.3%), and IBRD (20.4%). The IFAD and a few other multilateral creditors hold the remaining portion of the multilateral debt.
Bilateral debt is the money India owes to foreign governments. As on 31 December 2017, India had a total bilateral debt of $ 23,371 million. About 79.7% of the total bilateral debt is owed to Japan. Germany (10.9%), Russia (5.3%), France (3.3%), and the United States (0.7%) are other major creditors of India. The remaining 3.1% is owed to various other governments.
Other liabilities
It includes other interest bearing obligations of the government such as:
Post office Savings deposits under small saving schemes, loans raised through post office cash certificates, etc.
provident funds,
interest bearing reserve funds of departments like railways and telecommunications, etc.
The obligations of ‘other liabilities’ are met by the Public Account, just as the internal and external debts are secured under the Consolidated Fund. ‘
In 2017 India public debt was 1,896,129 million dollars, has increased 43,009 million since 2016. This amount means that the debt in 2018 reached 69.79% of India GDP, a 0.05 Percentage point fall from 2017, when it was 69.84% of GDP.
India per capita debt in 2018 was 1,416 dollars per inhabitant. In 2017 it was 1,384 dollars, afterwards rising by 32 dollars, and if we again check 2008 we can see that then the debt per person was 781 dollars . The position of India, as compared with the rest of the world, has improved in 2018 in terms of GDP percentage. Currently it is country number 139 in the list of debt to GDP and 69 in debt per capita, out of the 186.
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Government Market Borrowings
Governments borrow money to finance their operations, such as paying for infrastructure, Education, and healthcare. They do this by issuing debt securities, which are financial instruments that represent a loan from an investor to the government.
There are many different Types of government debt securities, each with its own characteristics. The most common types of government debt securities are Treasury Bills, Treasury notes, Treasury Bonds, repurchase agreements, federal agency securities, mortgage-backed securities, asset-backed securities, collateralized loan obligations, structured notes, Inflation-indexed securities, zero-coupon securities, floating-rate securities, foreign currency-denominated securities, sukuk, green bonds, social bonds, and Sustainable Development goals bonds.
Treasury bills are short-term debt securities with maturities of one year or less. They are issued at a DISCOUNT to their face value and redeemed at their face value on the maturity date. Treasury notes are intermediate-term debt securities with maturities of two to ten years. They are issued at a discount to their face value and redeemed at their face value on the maturity date. Treasury bonds are long-term debt securities with maturities of more than ten years. They are issued at a discount to their face value and redeemed at their face value on the maturity date.
Repurchase agreements are agreements in which the government sells securities to an investor with an agreement to repurchase them at a higher price on a specified date. This is a form of short-term borrowing. Federal agency securities are debt securities issued by government-sponsored enterprises, such as Fannie Mae and Freddie Mac. These enterprises are not part of the U.S. government, but they are backed by the full faith and credit of the U.S. government.
Mortgage-backed securities are securities that are backed by a pool of mortgages. The payments made on the mortgages are used to make payments to the investors in the securities. Asset-backed securities are securities that are backed by a pool of assets, such as car loans or credit card debt. The payments made on the assets are used to make payments to the investors in the securities.
Collateralized loan obligations are securities that are backed by a pool of loans. The loans are typically high-risk loans, such as subprime mortgages. The payments made on the loans are used to make payments to the investors in the securities. Structured notes are complex debt securities that are designed to meet the specific needs of investors. They can be used to hedge against risk, generate income, or achieve other Investment objectives.
Inflation-indexed securities are securities whose payments are adjusted for inflation. This protects investors from the effects of inflation. Zero-coupon securities are securities that do not pay interest. Instead, they are sold at a discount to their face value and redeemed at their face value on the maturity date. This makes them attractive to investors who are looking for a way to lock in a rate of return.
Floating-rate securities are securities whose interest rates are tied to a benchmark interest rate, such as the London Interbank Offered Rate (LIBOR). This allows investors to protect themselves from interest rate risk. Foreign currency-denominated securities are securities that are denominated in a foreign currency. This allows investors to gain exposure to foreign currencies and to hedge against currency risk.
Sukuk are Islamic bonds that are compliant with Sharia law. They are structured as a sale and leaseback arrangement, which means that the government sells an asset to an investor and then leases it back. This allows the government to raise money without incurring debt. Green bonds are bonds that are issued to finance projects that have a positive environmental impact. Social bonds are bonds that are issued to finance projects that have a positive social impact. Sustainable Development Goals bonds are bonds that are issued to finance projects that contribute to the achievement of the United Nations Sustainable Development Goals.
Government debt securities are an important part of the Financial Markets. They provide a way for governments to finance their operations and they offer investors a safe and reliable investment.
What is a government bond?
A government bond is a loan that an investor makes to a government. The government promises to repay the loan with interest at a specified date in the future.
There are many different types of government bonds, but they can be broadly divided into two categories: Treasury bonds and Treasury notes. Treasury bonds have a maturity of more than 10 years, while Treasury notes have a maturity of 10 years or less.
How do I buy a government bond?
You can buy government bonds directly from the government through the TreasuryDirect website. You can also buy government bonds through a broker or financial advisor.
What are the risks of investing in government bonds?
The main risk of investing in government bonds is that the government may not be able to repay the loan. This is called default risk. However, the US government has never defaulted on its debt, so this risk is very low.
What are the benefits of investing in government bonds?
Government bonds are considered to be very safe investments. They are also relatively low-risk investments, which means that they offer a relatively low return. However, government bonds are a good way to diversify your investment portfolio and to protect your money from inflation.
What is the yield on a government bond?
The yield on a government bond is the interest rate that the government pays on the loan. The yield is calculated as a percentage of the face value of the bond. For example, if a bond has a face value of $1,000 and a yield of 5%, the investor will receive $50 in interest each year.
What is the maturity date of a government bond?
The maturity date of a government bond is the date on which the government must repay the loan. The maturity date is usually specified on the bond certificate.
What is the coupon rate of a government bond?
The coupon rate of a government bond is the interest rate that the government pays on the loan. The coupon rate is usually specified on the bond certificate.
What is the face value of a government bond?
The face value of a government bond is the amount that the government must repay the investor on the maturity date. The face value is usually specified on the bond certificate.
What is the par value of a government bond?
The par value of a government bond is the face value of the bond. The par value is usually specified on the bond certificate.
What is the current yield of a government bond?
The current yield of a government bond is the annual interest payment divided by the Market Price of the bond. The current yield is a measure of the return that an investor will receive if they buy the bond at the current market price.
What is the yield to maturity of a government bond?
The yield to maturity of a government bond is the total return that an investor will receive if they buy the bond and hold it until maturity. The yield to maturity is calculated by taking into account the annual interest payments and the price of the bond.
What is the risk premium of a government bond?
The risk premium of a government bond is the additional return that an investor expects to receive for taking on the risk of investing in the bond. The risk premium is calculated by taking the yield to maturity of the bond and subtracting the risk-free rate of return.
What is the risk-free rate of return?
The risk-free rate of return is the return that an investor can expect to receive on a risk-free investment. The risk-free rate of return is usually measured by the yield on a Treasury bond.
What is the credit rating of a government bond?
The credit rating of a government bond is a measure of the risk that the government will default on the loan. The credit rating is assigned by a credit rating agency, such as Standard & Poor’s or Moody’s.
What is the liquidity of a government bond?
The liquidity of a government bond is a measure of how easy it is to sell the bond. The liquidity of a bond is affected by the size of the bond market, the number of buyers and sellers, and the bid-ask spread.
What is the bid-ask spread of a government bond?
The bid-ask spread of a government bond is the difference between the price that a buyer is willing to pay for the bond and the price that a seller is willing to accept for the bond. The bid-ask spread is a measure of the liquidity of the bond market.
What is the term structure of interest rates?
The term structure of interest rates is the relationship between the yield
Which of the following is not a type of government bond? (A) Treasury bill (B) Treasury note (C) Treasury bond (D) Treasury inflation-protected security (TIPS)
Which of the following is the correct formula for calculating the yield to maturity of a bond? (A) $YTM = \frac{C + F}{P}$ (B) $YTM = \frac{C + P}{F}$ (C) $YTM = \frac{F – P}{P}$ (D) $YTM = \frac{C – P}{P}$
Which of the following is the correct formula for calculating the present value of a bond? (A) $PV = \frac{C}{(1 + r)^n}$ (B) $PV = \frac{F}{(1 + r)^n}$ (C) $PV = \frac{P}{(1 + r)^n}$ (D) $PV = \frac{C – F}{(1 + r)^n}$
Which of the following is the correct formula for calculating the future value of a bond? (A) $FV = \frac{C}{(1 + r)^n}$ (B) $FV = \frac{F}{(1 + r)^n}$ (C) $FV = \frac{P}{(1 + r)^n}$ (D) $FV = \frac{C – F}{(1 + r)^n}$
Which of the following is the correct formula for calculating the duration of a bond? (A) $D = \frac{2}{n} \sum_{i=1}^n \frac{C_i}{P}$ (B) $D = \frac{2}{n} \sum_{i=1}^n \frac{F_i}{P}$ (C) $D = \frac{2}{n} \sum_{i=1}^n \frac{P_i}{P}$ (D) $D = \frac{2}{n} \sum_{i=1}^n \frac{C_i – F_i}{P}$
Which of the following is the correct formula for calculating the convexity of a bond? (A) $C = \frac{2}{n} \sum_{i=1}^n \frac{(C_i – F_i)^2}{P}$ (B) $C = \frac{2}{n} \sum_{i=1}^n \frac{(C_i – P)^2}{P}$ (C) $C = \frac{2}{n} \sum_{i=1}^n \frac{(F_i – P)^2}{P}$ (D) $C = \frac{2}{n} \sum_{i=1}^n \frac{(C_i – F_i)(C_i – P)}{P}$
Which of the following is the correct formula for calculating the modified duration of a bond? (A) $MD = \frac{D}{1 + r}$ (B) $MD = \frac{D}{1 – r}$ (C) $MD = \frac{D}{1 + r^2}$ (D) $MD = \frac{D}{1 – r^2}$
Which of the following is the correct formula for calculating the effective duration of a bond? (A) $ED = MD + \frac{C – P}{P} r$ (B) $ED = MD – \frac{C – P}{P} r$ (C) $ED = MD + \frac{C + P}{P} r$ (D) $ED = MD – \frac{C + P}{P} r$
Which of the following is the correct formula for calculating the Price Elasticity of Demand for a bond? (A) $E = \frac{\Delta Q}{\Delta P} \frac{P}{Q}$ (B) $E = \frac{\Delta Q}{\Delta P} \frac{Q}{P}$ (C) $E = \frac{\Delta P}{\Delta Q} \frac{P}{Q}$ (D) $E = \frac{\Delta P}{\Delta Q} \frac{Q}{P}$
Which of the following is the correct formula for calculating the yield spread between two bonds? (A) $YSP = \frac{YTM_1 – YTM_2}{YTM_1}$ (B) $YSP = \frac{