Distinct Ways of Sorting Out Government Debts
Government debt is one of the critical issues that affect most countries. It’s a challenge to most governments to run the economy of the country depending on tax collected from the citizens. One of the key reasons the government ask for a loan is to stabilize the fiscal monetary and to invest in various government projects such as education and health sectors. The government need to set aside a systematic structure and ways to settle down the loans. Failure of establishing the structure leads to inflation to the country and the creation of credit worries among countries. Sorting out of the government debts is one challenge that affect most countries, especially the developing countries. This article will explain the various efficient approaches the government can apply that to sort out the debts.
One of the most efficient way to sort out government debt is by enhancing economic growth in the country. If economic growth of the country is by a certain percentage, it means the government will gain more revenue collected. Economic growth leads to more than a collection of revenue to the government in terms of value-added tax (V.A. T), income tax and corporate tax. When there is economic growth, more people are employed, and there is high investment growth. The government can enhance economic growth by reducing fees and rates to attract more investors to the country. The government also need to create a peaceful environment for an ideal investment to occur. Enhancement of economic growth is the best option as it does not make the government to increase the taxes to sort out the debt.
To add on that government can reduce its expenditure by a certain percentage to sort out the debt. Reduction of spending is one of the efficient way that the government can use to settle the debt without raising the taxes. One of the way to cutting off of the government spending is by expanding pension age. Most government spends millions of the collected revenue on paying off the retired government officials. Increasing the retirement age means fewer people retiring, hence less expensive to the government. Expansion of pension age not only reduce government expenditure but also increases the size of work-force in different government departments. Significantly government can also slash off the salary of government officials as a way of reducing spending and sorting out of government debt. Most countries do not prefer a reduction of expenditure as it only affects a small percentage of people in the country.
Either the government can plan and amend different fiscal monetary policies to enable it to sort out the debt. Here, the government expresses and change unique plans to help in sorting out of the loan. Unconventional monetary policies that can be formulated and be used to sort out debt include: raising of taxes, reducing of interest rates, introducing new fees and investing of government bonds. Formulation of monetary policies come up with specific effects to the country’s economic development. For example, the raising of taxes is one of the monetary policy considered by most government across the globe to increase the revenue collection to the government, which intern is used to sort out government deficit. The government plans the policy of reducing interest rates to attract more borrowers and investors to the country. More investors enhance more tax collection, which boost revenue collection to the government.
In conclusion, sorting out of government debt is a crucial issue to a country. It needs systematic ways and various approaches such as enhancement of economic growth, reduction of government expenditure and manipulation of monetary policies to sort out the loans.