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Money and credit - Ivanov V.М.

20.2. The essence of international credit

In the international economic relations of any state, credit relations are essential.

International credit is a temporary transfer of commodity or monetary resources of some countries for use by other countries in order to accelerate their social and economic development.

The need to use international credit is determined by economic and foreign policy conditions: the development of foreign economic relations between states, firms based on international trade, scientific and technical cooperation, including the need to provide credit assistance to individual countries.

Credit relations directly affect the process of expanded reproduction in the country as a lender and a borrower. Providing a loan from the point of view of the reproduction process means that part of the created surplus product, which forms the accumulation fund, is withdrawn from the national economy of the creditor country and enters the borrower's country. For the creditor, this entails the need either to increase the production of goods that he has pledged to place on credit, in excess of domestic needs, or the use of previously accumulated commodity and monetary reserves. For the borrower, the loan is an additional source of expanded reproduction. Countries seek to use such an economic maneuver by material and financial resources in such a way that they move exactly where they can be rationally used to organize highly efficient production, in whose products both the borrower and the creditor are interested. As a result, mutual loans contribute to overcoming the differences in the level of economic development of countries cooperating among themselves, deepening the international division of labor.

The procedure for granting loans can be as follows:

• the amount of the loan is fully credited to a separate account in favor of the borrowing country, this account pays for the goods delivered;

• the credit account reflects the amounts of commodity deliveries, i.e. the amount of the credit on the account increases as the deliveries are made until the loan is fully used;

• deliveries under the loan are made through a clearing account for goods turnover, then the loan amount is transferred from the clearing account to the credit account. Such an order is usually applied in the event that the object of the loan is the goods of the same nomenclature as in the current commodity turnover;

• Credit is granted for compensatory transactions;

• Leasing is being drawn up, etc.

Depending on the timing of issuance, international loans are divided into short, medium and long-term.

Foreign state and other loans are secured by a pledge of money or other property of the borrower or other types of collateral in the prescribed manner.

When paying off loans, proportional, progressive and one-time methods are applied. The proportional method involves repaying the loan in equal installments; With progressive there is a gradual increase in the amount of payments; A one-time method is characterized by the fact that the entire loan amount is repaid immediately.

Repayment of loans and payment of interest on them are made by currency proceeds from the increase in exports of goods, the supply of goods of the usual export range of borrowing countries, the products of enterprises for the construction of which the loan was issued, and other ways stipulated in the loan agreements of the parties.