Money and credit - Ivanov VM

19.2. government credit

State credit reflects the accumulation of state funds to the repayment of the principles to fund government spending. Lenders appear natural and legal persons, the borrower - the state, through its agencies (the Ministry of Finance, national, local). This form of loan allows the borrower to mobilize additional financial resources to cover the budget deficit without exercise for this purpose issue of paper money. The state credit is used to stabilize the currency. With the development of the inflationary process, government borrowing from the population temporarily reduce its demand for payment. Because treatment is withdrawn the money supply, ie. E. There is diversion of funds from the money turnover on pre-agreed period.

For lenders, public credit is a form of savings, investment in securities, bringing additional income.

State loan is divided into types, reflecting the specific relationships and the impact of a number of factors. Species such a loan determined by the composition of borrowers and lenders; specific reasons for the emergence of the state needs to mobilize resources; place a loan; form and procedure for its completion; methods of attracting financial resources and ways of their return; State maturities of its obligations; the degree of risk of the lender and the borrower.

Depending on the borrower's credit state is centralized and decentralized. In the first case the borrower is a central fiscal authority of the country (Ministry of Finance), the second - local authorities (councils of people's deputies).

In place of receipt of the loan is divided into internal and external loans. At maturity, they are divided into short-term (1 year), medium (from 1 year to 5 years) and long term (over 5 years). In each case specifies the conditions, forms and terms of state credit.

Depending on the form and order of registration of credit relations are distinguished: government bonds and loans bezobligatsionnye. Release all sorts of treasury bills, promissory notes, loans by the central bank of the state budget - examples bezobligatsionnyh loans.

To issue bonds internal state and local loans. They may be either registered or bearer, interest and interest-free (target), winning freely circulating or with a limited range of treatment, savings, treasury.

Treasury bills (bills) State - type of securities certifying their holders making money in the budget and giving the right to receive a fixed income over the term of possession. Place on a voluntary basis among businesses and individuals. Treasury bills are issued by the State: long-term (5-25 years) - Long-term; for a period of 3, 6 and 12 months - short-term; from 1 year to 5 years - medium.

Securities are divided into two groups: those traded on the secondary market; not entering the secondary market. On the secondary market can do treasury bonds (bills) and government bonds. Not traded on the secondary market, savings bonds, bonds (or other types of securities), designed the external debt, bonds of local authorities.

When purchasing government securities value has income from it, depending on the type of security, its nominal value, the period of release conditions, the degree of risk, the rate of inflation. The main uncertainty is due to the possibility of changes in the expected inflation rate. If inflation rates are rising, the creditors bear the losses, and the borrower makes a profit.

For the creditor (legal entities and individuals) on the acquisition of securities of governments and other risks, such as credit, market, interest rate.

The credit risk inherent in the securities related to the likelihood that the financial capacity of the issuer (the state) are reduced, so it can not meet its financial obligations. The credit risk associated with the obligations of the state, follows from the peculiarities of the debtor or issuer; the nature of economic entities, which are based on obligations; the ability to levy taxes and borrow.

Market risk arises from the fact that due to unforeseen changes in the securities markets or the economic attractiveness of government securities as an investment object (investment) may be partially reduced.

Interest rate risk - the risk of changes in interest rates and the related risk of lowering the market price of the securities. The reasons for this - fixing the interest on a contractual basis at the time of their release, and the relative freedom to market rates fluctuations up and down.

Repayment of debt issued by the government and the NBU stored, is made in the future due to the profit of the bank.

State loan forms part of the domestic government debt. Ukraine's state debt service entrusted to the National Bank.