The importance of Governments’ Debt management

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Looking through the world,we find that there are many governments in debt,while others keep their finance in good status.For those governments in debt,the people mostly criticize them,for those who have surplus money,people may also not so happy to see.So how do governments to arrange their debt?And what are the advantages of good debt management?

Firstly,let’s see how the governments run their functions.Mostly the governments provide public services,which need payment.The governments build new schools,so students can enjoy the education,the governments set up police stations,so our safety can be secured.But the governments need money to establish these devices and services.Then where does the money come from?The mainly income for governments are the tax,bonus of public companies,national debt,fees of public services.Some governments also gain income from selling land.But among those incomes,the mainly income is the various taxes.

Secondly,for governments which own good debt managements,they have enough money,so they can spend the money where it is needed,such as building schools to enhance the local education level of its people.enlarging more highways,subways,airports to gain a better traffic system.In some countries or regions,the governments so rich that they can provide public free education,for example,in Dubai,citizens do not need to pay for tuition fee.and in Hongkong,the government give money to its people.A government with good debt management brings more security to its people,and people are definitely love to go with those governments.

Thirdly,bad debt management brings a lot of troubles to the governments and its people.Governments with bad financial status always need money urgently.If governments is too poor to pay for the needed services.Some public services may disabled.Governments in debt can not provide more and high quality public services,they may need to delay the building of new schools and cut the budget of social insurance and medical treatment.In that case,patients may not be able to receive the timely treatment due to the lack of hospitals.

Fourthly,When governments need money,then they will think how to get money in a unnatural way.As we have talked about the mainly incomes for government above.So it is understood that normally governments will raise the taxes.which also means that the public need to pay more tax to governments.So people is going to loss money.If governments raise the taxes highly,it will bring bad effect on the economy.The growth of economy may be kept down.Governments may also issue more money to cover its deficit.In that case,the national economy may sink into inflation,the commodity prices will raise.If the situation really happened,we say the government is a bad government.

Fifthly,how do governments keep in good finance status?The key point is never use more than the incomes.When the incomes can cover the uses.setting tax rate right to grow the economy,governments can gain a long term and stable income.

Updated On 6th Aug,2009.