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Deficit Financing: Implications and Management

Listed author(s):
  • Govinda Bahadur Thapa Ph. D.

    (Nepal Rastra Bank)

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    Developing countries usually mobilize part of their resources by borrowing from internal as well as external sources to finance their development activities. These sources gradually build up the debt stock of the country. Such debt stock demands regular debt servicing, that is, principal and interest payment, which consumes scarce resources that can be used for financing development. Therefore, excessive deficits and heavy borrowing to finance that deficit drain out the resources of the developing countries. Liquidity is also involved while borrowing and servicing. Thus, both of these transactions are conducted in such a way that the country concerned always finds itself in a comfortable position with regard to the liquidity, which is known as the debt management.

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    Article provided by Nepal Rastra Bank, Research Department in its journal NRB Economic Review.

    Volume (Year): 17 (2005)
    Issue (Month): (April)
    Pages: 16-26

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    Handle: RePEc:nrb:journl:v:17:y:2005:p:16-26
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    1. Sheku Bangura & Robert Powell & Damoni N Kitabire, 2000. "External Debt Management in Low-Income Countries," IMF Working Papers 00/196, International Monetary Fund.
    2. Feltenstein, Andrew & Iwata, Shigeru, 2002. "Why is it so hard to finance budget deficits? Problems of a developing country," Journal of Asian Economics, Elsevier, vol. 13(4), pages 531-544.
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