Nov 2015 Q3 a.
It is the opinion of some people that borrowing by government may be better option in some cases than imposition of taxes as taxes have the potential of creating resentment and upheavals during a period of economic difficulties.
i. Explain fully what Public Sector Debt is? (5 marks)
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Public debt is the sum of public and publicly guaranteed debt. Public debt is the sum of domestic and external obligations of public debtors which include the central government and its agencies and publicly guaranteed debt is the sum of all domestic and external obligations of the private sector that is guaranteed for repayment by a public entity.
ii. What are the objectives of Public Debt Management. (4 marks)
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- Minimize borrowing costs
- Keep risks at an acceptable level
- Support the development of domestic markets
- Ensure the financing needs of the government