Archive for November, 2008
Nov
26
Which Debt Can be Settled?
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Devora Witts asked:
We receive many questions regarding debt settlement and specially inquiries as to whether certain debts can be settled or not. This is an important issue as not all debts can be settled with regular debt repair agencies. And thus, prior to hiring the services of such agencies you need to make sure that your particular debts are suitable for settlement or else you would be just wasting money.
Under the right circumstances all debt can be settled, but debt repair agencies deal only with certain types of debt. Following is a short description of the different types of debt that qualify for a debt elimination process through an agency and those debt types that do not qualify for regular debt elimination processes and need different solutions in order to be cancelled or erased.
Debt Types That Qualify For Debt Settlement
The first type of debt that we will briefly explain is credit card debt. Credit card debt is in most cases unsecured debt that features high interest rates compared to other form of debts. Thus, it is extremely important to include this kind of debt in any debt settlement program. Credit card debt certainly qualifies for this type of debt aid due to its unsecured nature and the repayment flexibility it presents.
The same goes to store card debt. Just like credit card debt, store card debt is unsecured debt and usually charges higher interest rates than credit card debt and personal loans. Thus, it should also be included into a debt aid program.
Personal loans, if unsecured can also qualify for debt settlement. This is due to the fact that if the lender refuses to negotiate, he would have to undertake long legal processes to recover the money and he would also be forced to negotiate prior and during the process with costly legal fees. Of course, this applies to unsecured personal loans only and not secured loans.
Different bills, like hospital bills and other services’ bills can also be included in a debt elimination program. They are usually included because the debt is unsecured and because the creditor has less negotiating power than banks and other big companies. Thus, it is easier for a negotiator to convince the creditor that he should accept the deal or he might lose the chances of getting any money back at all.
Debt Types That Do Not Qualify For Debt Settlement
There are other debt types that cannot be settled. These debts include: student loans which can be consolidated, waived or forgiven but never settled. The only exceptions are certain private student loans which are not subsidized by the government or a private non-profit institution and thus are subject to the rules of any personal unsecured loan.
Mortgage loans and home equity loans are guaranteed by a property or the equity on that property and thus are not subject to negotiation because the lender can always resort to request the foreclosure of the property and claim all the money owed. The solution for these debts is refinancing which can modify the terms of the secured debt while keeping the security in place.
Car loans which are secured on the car are just like mortgage loans, and with only a few differences, are tied to the same rules. Just like mortgage loans, car loans can be refinanced or fully paid off with the aid of a mortgage or home equity loan. Thus, to solve a debt problem derived from a car loan your main options are debt consolidation and refinancing.
Finally, tax debts can not be settled either. There are some circumstances in which under special hardship, a debt can be forgiven by the government agency. However, these are very special situations with complex requirements. And often, they imply that the debtor has to resort to extreme measures like filing for bankruptcy.
We receive many questions regarding debt settlement and specially inquiries as to whether certain debts can be settled or not. This is an important issue as not all debts can be settled with regular debt repair agencies. And thus, prior to hiring the services of such agencies you need to make sure that your particular debts are suitable for settlement or else you would be just wasting money.
Under the right circumstances all debt can be settled, but debt repair agencies deal only with certain types of debt. Following is a short description of the different types of debt that qualify for a debt elimination process through an agency and those debt types that do not qualify for regular debt elimination processes and need different solutions in order to be cancelled or erased.
Debt Types That Qualify For Debt Settlement
The first type of debt that we will briefly explain is credit card debt. Credit card debt is in most cases unsecured debt that features high interest rates compared to other form of debts. Thus, it is extremely important to include this kind of debt in any debt settlement program. Credit card debt certainly qualifies for this type of debt aid due to its unsecured nature and the repayment flexibility it presents.
The same goes to store card debt. Just like credit card debt, store card debt is unsecured debt and usually charges higher interest rates than credit card debt and personal loans. Thus, it should also be included into a debt aid program.
Personal loans, if unsecured can also qualify for debt settlement. This is due to the fact that if the lender refuses to negotiate, he would have to undertake long legal processes to recover the money and he would also be forced to negotiate prior and during the process with costly legal fees. Of course, this applies to unsecured personal loans only and not secured loans.
Different bills, like hospital bills and other services’ bills can also be included in a debt elimination program. They are usually included because the debt is unsecured and because the creditor has less negotiating power than banks and other big companies. Thus, it is easier for a negotiator to convince the creditor that he should accept the deal or he might lose the chances of getting any money back at all.
Debt Types That Do Not Qualify For Debt Settlement
There are other debt types that cannot be settled. These debts include: student loans which can be consolidated, waived or forgiven but never settled. The only exceptions are certain private student loans which are not subsidized by the government or a private non-profit institution and thus are subject to the rules of any personal unsecured loan.
Mortgage loans and home equity loans are guaranteed by a property or the equity on that property and thus are not subject to negotiation because the lender can always resort to request the foreclosure of the property and claim all the money owed. The solution for these debts is refinancing which can modify the terms of the secured debt while keeping the security in place.
Car loans which are secured on the car are just like mortgage loans, and with only a few differences, are tied to the same rules. Just like mortgage loans, car loans can be refinanced or fully paid off with the aid of a mortgage or home equity loan. Thus, to solve a debt problem derived from a car loan your main options are debt consolidation and refinancing.
Finally, tax debts can not be settled either. There are some circumstances in which under special hardship, a debt can be forgiven by the government agency. However, these are very special situations with complex requirements. And often, they imply that the debtor has to resort to extreme measures like filing for bankruptcy.
Nov
26
Public Debt Management System in Govt. Accounting Phenomena
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Kh. Atiar Rahman asked:
Public Debt Management is the process of establishing and implementing a policy for managing the government’s debt in order to raise the required amount of funding, track its cost and risk objectives, and to convene any other public debt management goals for which the government has put criteria for developing and maintaining an efficient and liquid market for national securities. Hence,
The Legal framework should clarify the authority to borrow and to issue new debt, invest and undertake transactions on behalf of the Government. The organizational framework should be well specified where mandates and roles are well articulated. Sovereign debt management may span a country’s debt management organization or a fundamental depository. Debt management report should be made publicly which would review preceding year’s activities and provide synopsis of borrowing plans based on budget protuberance.
The Public Accounts comprises of three divisions Debt, Deposits and Reserves and Remittances. The ‘Debt’ Comprises receipt and payments in respect of which government incurs a liability to repay the money received or has a claim to recover the amount paid together with repayments of the former and recoveries of the latter. State General Provident Fund, National Savings Certificate and Postal Savings Certificates etc. are recorded in this division. The ‘Deposit and Reserves’ comprises receipts and payment for which the Government acts as a banker. The government, as the banker, deals with civil deposit, personal deposit and renewal reserve fund etc. The ‘Remittances’ division comprises all adjusting heads for instance, remittances to and from Bangladesh Bank and PWD, Defence, Forest, T and T and Postal etc. Remittances to Bangladesh mission abroad are also included in this division. The form of accounting used by the Government of Bangladesh is based on the cash basis of accounting; that is, recording the transaction at the time when cash is paid or received. Cash basis of Accounting is a traditional basis of govt accounting. There are completely two different sets of published accounts in Bangladesh- the Annual Finance Accounts and the Annual Appropriation Accounts and Annual Finance Accounts: The Finance Accounts reflect total annual receipts and expenditure of the government together with relevant financial statements.
Furthermore, the cash balance of the government is also publicized in this statement where preparation of the Annual Finance Accounts is vested with the C&AG according to Article 4 of the Comptroller and Auditor General (Additional Functions) Act, 1974. Appropriation Accounts: The appropriation is a proportional report viewing comprehensive head-wise/code-wise ultimate budgetary distribution and authentic expenses of different ministries and their subordinate offices with details of variances (if any). According to Article 128 of the Constitution and Rule 4 of the Comptroller and Auditor General (Additional functions) Act 1974, preparation of the Appropriation Accounts by the concerned Accounts Offices, it is reviewed by the Directorates of Civil Audit and PT&T according to concerned portions and then certified by the C&AG with required observations.
The primary accounts are held in reserve where the transactions take place. There are two branches of primary accounts, one kept by the govt. accounting departments; and the other kept by the self-drawing departments known as departmentalized accounts departments, like Public Works Department, Telephone Board Postal Department, forest Department etc. To keep consistency and for the convenience of administrative functions, govt. has set up accounting offices under the control of CGA. CGDF and ADGFR. Office of the CGA covers all ministries and departments except Defence and Railway. The lowest tire of accounting unit tender the Controller General of Accounts (CGA) is the Upazilla Accounts Office. Next unit is the District Accounts Office, which is located at the District Headquarters. For the account purpose, there are also 20 regional Accounts Offices at the greater district headquarters, which consolidate the accounts received from the District and Upazilla Accounts Officers for onward transmission to the Controller General of Accounts. The Chief Accounts Offices of the respective Ministries keep accounts of the presidency. There are 21 Accounts Offices for the ministries and divisions of the govt. They work under the Administrative control of the C&AG and CGA and under the functional control of the secretary of the concerned Ministry/Division. All these Accounts Offices and their activities facilities the CGA office to prepare the Monthly Accounts, the Finance Accounts and Appropriation Accounts. Considering the special nature of functions and activities of the Defense Service and the Railway. Govt. has established separated departments for their accounting functions, namely the CGDF and the ADGFR respectively. Accounting units of these Departments also prepare and maintain their monthly accounts, which facilitate the CGDF and the ADGFR to prepare the Monthly Accounts, the Finance Accounts and the Appropriation Accounts.
The accounting system for the departments, which run the Departmentalized concept such as Railway, Defence, Postal, T&T, Works, Forest etc, is a bit different from concept such as Railway, Defense, Postal, T&T, Works, Forest etc. is a bit different from the general government accounting system. However, except Railway all other departments do not have separate bank account. The Railway has separate bank account with the Bangladesh Bank and that shows separate through a head called ”Remittance”"- an adjusting head in the government account and deposit it their income through using this head too. The Bangladesh Bank (BB) acts the banker to the government although there exists distinction between Consolidated Fund and Public Account, in effect cash balance of the Government is one and that lies with the Bangladesh Bank. The Accounting Offices issue cheque in favour of the parties/person’s and then the cheques are finally drawn from the (now Central Reconciliation Unit) fore reconciliation and outside the presidency where there are no branches of BB Sonali Bank acts as the Banker to the Government Cheques issued by the Accounting Offices and drawn on the Sonali Bank afterwards are sent back to the concerned Accounting Offices for reconciliation. The Thana, District and Chief Accounts Officers record each and every transaction of the government as the initial accounts where it is applicable. Initial accounts are recorded under the relevant head of accounts where the transaction is taken place where Upazilla and District Accounts Offices send accounts as usual by the 10th of the following month. The DCA Offices subsequently classify the detailed accounting information under the respective head of accounts and propel it to the CGA by the 20th of that month. On the other side, self-drawing Departments transmit their accounts to the CAO of their respective ministries. Along with those, the CAO Office prepares initial accounts of the presidency, classify and consolidate the accounts within the purview of its ministry’s boundaries and then send the accounts to the CGA by 20th of the following month. They also send the accounts to their respective Principal Accounting Officer/Secretary of Ministry or Division. CGA Prepares consolidated accounts based on the accounting data supplied by the CAO and DCA’s. Similar procedure is followed in the accounting units of the Defense Finance and Railway so far as flow of accounts is concerned. In respect of preparation of the Finance Accounts and the Appropriation Accounts of the Defence Ministry and the Railway Department, the CGDF and the ADGFR respectively play the key role. The monthly Accounts prepared and maintained by the Accounts Officers of the government are the basis of Finance Accounts and the Appropriation Accounts. The following criteria are the factor which is worth noting.
Well-articulated responsibilities for staff, clear monitoring, control policies and reporting arrangements required.
Precise and comprehensive management information system with proper safeguards.
Staff be subject to a code of conduct and conflict of interest guidelines re management of personal financial affairs.
Debt Management approach:
Risk can be moderate by transforming debt structure against costs which is accelerated for borrowing decisions at reduced risks. Debt managers should consider financial and other risks characteristic to government cash flows where carefully assessment and managing risk associated with foreign currency and short term floating rate debt is virtual important with due regard. Debt Management Strategy should be Cost effective where cash management policies needs to meet with a high degree of certainty financial obligations as they fall due. A framework enabling debt managers to manage the trade-off between expected costs and risk in government debt portfolio should be set forth in consistence with real life situation. Impact of contingent liabilities on Government financial and liquidity position cannot be ignored while making decision in respect of selecting borrowing criteria.
Risks in sovereign debt management
Market risks involve changes in interest rate, exchange rate and commodity prices and their impact on government debt servicing. Longer term fixed rate needs to be preferred. In this connection, rollover risk is another factor to reduce risk in the field of Debt Management System: The risk that debt may have to be rolled over at an unusually high cost, and in extreme cases, cannot be rolled over. Operational Risk: A Transaction error, failure of internal control or systems, security breaches natural disasters affecting business activity.
Risks in sovereign debt management
Liquidity risk: It involves a situation when volumes of liquid assets diminish quickly in face of unanticipated cash flow obligation or difficulty in raising cash thru borrowing on short notice. Credit Risk: It refers to non-performance by borrowers on loans or other financial assets e.g. contingent liabilities, derivative contract entered into by debt manager.
Develop Efficient Govt. Securities Market
To minimize cost and risk debt managers should strive to develop efficient securities market. To strive to achieve a broad investor base for both domestic and foreign obligation with investors being treated equitably.
The primary market should be transparent and predictable with market-based debt issuance. Government should promote a resilient and there should have criteria for
Debt versus Deficit which
deficit is a flow of new debt incurred when the Government spends more than it raises as taxes.
Ex: When US government ran a deficit of $ 100 billion in 1995, it adds to stock of government debt, but when it enjoyed a surplus of $ 200 billion in 1999, it reduced the stock by that amount.
Objectives of Debt management
To ensure that government financing needs and its payment obligations are met.
To secure government debt at the lowest possible cost over medium and long range.
It should be consistent with prudent degree of risk
Coordination with Monetary and Fiscal Policies
Debt Managers, fiscal policy advisors and central bankers should share an understanding on the objectives of debt management, fiscal and monetary policies. They should also know Government’s current and future liquidity requirements. Debt managers should convey fiscal authorities their views on the costs and risk associated with government financing requirements and debt levels. Divergent objectives respected where Debt-managers focus on cost/risk trade-off of debt while monetary policy directed towards achieving price-stability and inflation issues. In this connection, Debt management and monetary policy be allowed to perform in their own realms with one not affecting the core objectives of the other. Furthermore, the goal of cost minimization subject to prudent level of risk should not be viewed as a mandate to reduce interest rate. Coordination with Monetary and Fiscal Policies
Debt Managers, fiscal policy advisors and central bankers should share an understanding on the objectives of debt management, fiscal and monetary policies. They should also know Government’s current and future liquidity requirements where Debt managers should convey fiscal authorities their views on the costs and risk associated with government financing requirements and debt levels.
Divergent objectives respected and in this respect, debt-managers focus on cost/risk trade-off of debt while monetary policy directed towards achieving price-stability and inflation issues.
Debt management and monetary policy be allowed to perform in their own realms with one not affecting the core objectives of the other.
The goal of cost minimization subject to prudent level of risk should not be viewed as a mandate to reduce interest rate.
Borrowing Authority:
An IMF survey shows that:
In all of the countries surveyed, the legal authority to borrow rests with the parliament
In most of the countries, legislation has been enacted authorizing the Ministry of Finance to borrow on behalf of the government.
In some others, that power has been delegated to the Cabinet, and in one case (India) straightly to the state bank.
Debt Management Responsibility in Bangladesh: Regarding debt management system, there exists lots of responsibility to create and debt management market by borrowing and establishing funds and in a nutshell, these are as follows:
The Rules of Business empowers Finance Division to borrow and float market loans. Bangladesh Bank Order 1972 envisages that BB acts as an agent to the Government, among others, for management of the public debt, they play active role in this respect.
FSAP Report of IMF recommended that the terms, manner and conditions of borrowing fund should rest with Finance Division.
The Report envisaged that Debt Management Office may be established in Finance Division. That the Office should report to Finance Secretary. The Office is responsible for all public debt including NSCs and external debt as well. Currently, NSCs debt are managed by IRD while external debt are managed by ERD, while borrowing from the banking system is managed by Bangladesh Bank with peripheral. Current Practice in Debt Management
Domestic debt management is performed by BB very often not reflecting the needs of Government’s fiscal policy. The objective of debt management and monetary management seems to get blurred. Because of lack of involvement FD depends on its creditor (BB) for debt stock and borrowing information during the year.
Government accounting system derived its authorization from the Constitution of Bangladesh and as such the Constitution empowered the Comptroller and Auditor General to lay down the forms and manners of the government accounting. The Comptroller and Auditor General (Additional Functions) Act, 1974 assigned the C&AG with the responsibilities of maintenance the accounts of the Republic. These responsibilities of the Appropriation Accounts. Office of the Controller General of Accounts (CGA), Controller General Defense Finance (CGDF), Additional Director General Finance of Railway (ADGFR) and the Bangladesh Bank are the main source of accounting information for the government. Controller General of Accounts (CGA) plays the most important role in the government accounting function. CGA is responsible for keeping the accounts of the receipts and expenditure that are done the govt. departments other than the departmentalized accounting Departments and the Defense and Railway Department. CGDF maintains the accounts of the armed Forces and the departments under the Ministry of Defense. ADGFR is responsible for keeping the accounts of Bangladesh Railway. Bangladesh Bank furnishes the information and figures to the govt. accounting departments regarding foreign loans and aids provided by the International Development Partners to Bangladesh.
Public Debt Management is the process of establishing and implementing a policy for managing the government’s debt in order to raise the required amount of funding, track its cost and risk objectives, and to convene any other public debt management goals for which the government has put criteria for developing and maintaining an efficient and liquid market for national securities. Hence,
The Legal framework should clarify the authority to borrow and to issue new debt, invest and undertake transactions on behalf of the Government. The organizational framework should be well specified where mandates and roles are well articulated. Sovereign debt management may span a country’s debt management organization or a fundamental depository. Debt management report should be made publicly which would review preceding year’s activities and provide synopsis of borrowing plans based on budget protuberance.
The Public Accounts comprises of three divisions Debt, Deposits and Reserves and Remittances. The ‘Debt’ Comprises receipt and payments in respect of which government incurs a liability to repay the money received or has a claim to recover the amount paid together with repayments of the former and recoveries of the latter. State General Provident Fund, National Savings Certificate and Postal Savings Certificates etc. are recorded in this division. The ‘Deposit and Reserves’ comprises receipts and payment for which the Government acts as a banker. The government, as the banker, deals with civil deposit, personal deposit and renewal reserve fund etc. The ‘Remittances’ division comprises all adjusting heads for instance, remittances to and from Bangladesh Bank and PWD, Defence, Forest, T and T and Postal etc. Remittances to Bangladesh mission abroad are also included in this division. The form of accounting used by the Government of Bangladesh is based on the cash basis of accounting; that is, recording the transaction at the time when cash is paid or received. Cash basis of Accounting is a traditional basis of govt accounting. There are completely two different sets of published accounts in Bangladesh- the Annual Finance Accounts and the Annual Appropriation Accounts and Annual Finance Accounts: The Finance Accounts reflect total annual receipts and expenditure of the government together with relevant financial statements.
Furthermore, the cash balance of the government is also publicized in this statement where preparation of the Annual Finance Accounts is vested with the C&AG according to Article 4 of the Comptroller and Auditor General (Additional Functions) Act, 1974. Appropriation Accounts: The appropriation is a proportional report viewing comprehensive head-wise/code-wise ultimate budgetary distribution and authentic expenses of different ministries and their subordinate offices with details of variances (if any). According to Article 128 of the Constitution and Rule 4 of the Comptroller and Auditor General (Additional functions) Act 1974, preparation of the Appropriation Accounts by the concerned Accounts Offices, it is reviewed by the Directorates of Civil Audit and PT&T according to concerned portions and then certified by the C&AG with required observations.
The primary accounts are held in reserve where the transactions take place. There are two branches of primary accounts, one kept by the govt. accounting departments; and the other kept by the self-drawing departments known as departmentalized accounts departments, like Public Works Department, Telephone Board Postal Department, forest Department etc. To keep consistency and for the convenience of administrative functions, govt. has set up accounting offices under the control of CGA. CGDF and ADGFR. Office of the CGA covers all ministries and departments except Defence and Railway. The lowest tire of accounting unit tender the Controller General of Accounts (CGA) is the Upazilla Accounts Office. Next unit is the District Accounts Office, which is located at the District Headquarters. For the account purpose, there are also 20 regional Accounts Offices at the greater district headquarters, which consolidate the accounts received from the District and Upazilla Accounts Officers for onward transmission to the Controller General of Accounts. The Chief Accounts Offices of the respective Ministries keep accounts of the presidency. There are 21 Accounts Offices for the ministries and divisions of the govt. They work under the Administrative control of the C&AG and CGA and under the functional control of the secretary of the concerned Ministry/Division. All these Accounts Offices and their activities facilities the CGA office to prepare the Monthly Accounts, the Finance Accounts and Appropriation Accounts. Considering the special nature of functions and activities of the Defense Service and the Railway. Govt. has established separated departments for their accounting functions, namely the CGDF and the ADGFR respectively. Accounting units of these Departments also prepare and maintain their monthly accounts, which facilitate the CGDF and the ADGFR to prepare the Monthly Accounts, the Finance Accounts and the Appropriation Accounts.
The accounting system for the departments, which run the Departmentalized concept such as Railway, Defence, Postal, T&T, Works, Forest etc, is a bit different from concept such as Railway, Defense, Postal, T&T, Works, Forest etc. is a bit different from the general government accounting system. However, except Railway all other departments do not have separate bank account. The Railway has separate bank account with the Bangladesh Bank and that shows separate through a head called ”Remittance”"- an adjusting head in the government account and deposit it their income through using this head too. The Bangladesh Bank (BB) acts the banker to the government although there exists distinction between Consolidated Fund and Public Account, in effect cash balance of the Government is one and that lies with the Bangladesh Bank. The Accounting Offices issue cheque in favour of the parties/person’s and then the cheques are finally drawn from the (now Central Reconciliation Unit) fore reconciliation and outside the presidency where there are no branches of BB Sonali Bank acts as the Banker to the Government Cheques issued by the Accounting Offices and drawn on the Sonali Bank afterwards are sent back to the concerned Accounting Offices for reconciliation. The Thana, District and Chief Accounts Officers record each and every transaction of the government as the initial accounts where it is applicable. Initial accounts are recorded under the relevant head of accounts where the transaction is taken place where Upazilla and District Accounts Offices send accounts as usual by the 10th of the following month. The DCA Offices subsequently classify the detailed accounting information under the respective head of accounts and propel it to the CGA by the 20th of that month. On the other side, self-drawing Departments transmit their accounts to the CAO of their respective ministries. Along with those, the CAO Office prepares initial accounts of the presidency, classify and consolidate the accounts within the purview of its ministry’s boundaries and then send the accounts to the CGA by 20th of the following month. They also send the accounts to their respective Principal Accounting Officer/Secretary of Ministry or Division. CGA Prepares consolidated accounts based on the accounting data supplied by the CAO and DCA’s. Similar procedure is followed in the accounting units of the Defense Finance and Railway so far as flow of accounts is concerned. In respect of preparation of the Finance Accounts and the Appropriation Accounts of the Defence Ministry and the Railway Department, the CGDF and the ADGFR respectively play the key role. The monthly Accounts prepared and maintained by the Accounts Officers of the government are the basis of Finance Accounts and the Appropriation Accounts. The following criteria are the factor which is worth noting.
Well-articulated responsibilities for staff, clear monitoring, control policies and reporting arrangements required.
Precise and comprehensive management information system with proper safeguards.
Staff be subject to a code of conduct and conflict of interest guidelines re management of personal financial affairs.
Debt Management approach:
Risk can be moderate by transforming debt structure against costs which is accelerated for borrowing decisions at reduced risks. Debt managers should consider financial and other risks characteristic to government cash flows where carefully assessment and managing risk associated with foreign currency and short term floating rate debt is virtual important with due regard. Debt Management Strategy should be Cost effective where cash management policies needs to meet with a high degree of certainty financial obligations as they fall due. A framework enabling debt managers to manage the trade-off between expected costs and risk in government debt portfolio should be set forth in consistence with real life situation. Impact of contingent liabilities on Government financial and liquidity position cannot be ignored while making decision in respect of selecting borrowing criteria.
Risks in sovereign debt management
Market risks involve changes in interest rate, exchange rate and commodity prices and their impact on government debt servicing. Longer term fixed rate needs to be preferred. In this connection, rollover risk is another factor to reduce risk in the field of Debt Management System: The risk that debt may have to be rolled over at an unusually high cost, and in extreme cases, cannot be rolled over. Operational Risk: A Transaction error, failure of internal control or systems, security breaches natural disasters affecting business activity.
Risks in sovereign debt management
Liquidity risk: It involves a situation when volumes of liquid assets diminish quickly in face of unanticipated cash flow obligation or difficulty in raising cash thru borrowing on short notice. Credit Risk: It refers to non-performance by borrowers on loans or other financial assets e.g. contingent liabilities, derivative contract entered into by debt manager.
Develop Efficient Govt. Securities Market
To minimize cost and risk debt managers should strive to develop efficient securities market. To strive to achieve a broad investor base for both domestic and foreign obligation with investors being treated equitably.
The primary market should be transparent and predictable with market-based debt issuance. Government should promote a resilient and there should have criteria for
Debt versus Deficit which
deficit is a flow of new debt incurred when the Government spends more than it raises as taxes.
Ex: When US government ran a deficit of $ 100 billion in 1995, it adds to stock of government debt, but when it enjoyed a surplus of $ 200 billion in 1999, it reduced the stock by that amount.
Objectives of Debt management
To ensure that government financing needs and its payment obligations are met.
To secure government debt at the lowest possible cost over medium and long range.
It should be consistent with prudent degree of risk
Coordination with Monetary and Fiscal Policies
Debt Managers, fiscal policy advisors and central bankers should share an understanding on the objectives of debt management, fiscal and monetary policies. They should also know Government’s current and future liquidity requirements. Debt managers should convey fiscal authorities their views on the costs and risk associated with government financing requirements and debt levels. Divergent objectives respected where Debt-managers focus on cost/risk trade-off of debt while monetary policy directed towards achieving price-stability and inflation issues. In this connection, Debt management and monetary policy be allowed to perform in their own realms with one not affecting the core objectives of the other. Furthermore, the goal of cost minimization subject to prudent level of risk should not be viewed as a mandate to reduce interest rate. Coordination with Monetary and Fiscal Policies
Debt Managers, fiscal policy advisors and central bankers should share an understanding on the objectives of debt management, fiscal and monetary policies. They should also know Government’s current and future liquidity requirements where Debt managers should convey fiscal authorities their views on the costs and risk associated with government financing requirements and debt levels.
Divergent objectives respected and in this respect, debt-managers focus on cost/risk trade-off of debt while monetary policy directed towards achieving price-stability and inflation issues.
Debt management and monetary policy be allowed to perform in their own realms with one not affecting the core objectives of the other.
The goal of cost minimization subject to prudent level of risk should not be viewed as a mandate to reduce interest rate.
Borrowing Authority:
An IMF survey shows that:
In all of the countries surveyed, the legal authority to borrow rests with the parliament
In most of the countries, legislation has been enacted authorizing the Ministry of Finance to borrow on behalf of the government.
In some others, that power has been delegated to the Cabinet, and in one case (India) straightly to the state bank.
Debt Management Responsibility in Bangladesh: Regarding debt management system, there exists lots of responsibility to create and debt management market by borrowing and establishing funds and in a nutshell, these are as follows:
The Rules of Business empowers Finance Division to borrow and float market loans. Bangladesh Bank Order 1972 envisages that BB acts as an agent to the Government, among others, for management of the public debt, they play active role in this respect.
FSAP Report of IMF recommended that the terms, manner and conditions of borrowing fund should rest with Finance Division.
The Report envisaged that Debt Management Office may be established in Finance Division. That the Office should report to Finance Secretary. The Office is responsible for all public debt including NSCs and external debt as well. Currently, NSCs debt are managed by IRD while external debt are managed by ERD, while borrowing from the banking system is managed by Bangladesh Bank with peripheral. Current Practice in Debt Management
Domestic debt management is performed by BB very often not reflecting the needs of Government’s fiscal policy. The objective of debt management and monetary management seems to get blurred. Because of lack of involvement FD depends on its creditor (BB) for debt stock and borrowing information during the year.
Government accounting system derived its authorization from the Constitution of Bangladesh and as such the Constitution empowered the Comptroller and Auditor General to lay down the forms and manners of the government accounting. The Comptroller and Auditor General (Additional Functions) Act, 1974 assigned the C&AG with the responsibilities of maintenance the accounts of the Republic. These responsibilities of the Appropriation Accounts. Office of the Controller General of Accounts (CGA), Controller General Defense Finance (CGDF), Additional Director General Finance of Railway (ADGFR) and the Bangladesh Bank are the main source of accounting information for the government. Controller General of Accounts (CGA) plays the most important role in the government accounting function. CGA is responsible for keeping the accounts of the receipts and expenditure that are done the govt. departments other than the departmentalized accounting Departments and the Defense and Railway Department. CGDF maintains the accounts of the armed Forces and the departments under the Ministry of Defense. ADGFR is responsible for keeping the accounts of Bangladesh Railway. Bangladesh Bank furnishes the information and figures to the govt. accounting departments regarding foreign loans and aids provided by the International Development Partners to Bangladesh.
Nov
26
How to Destroy Your Debt
Posted by: | Comments
Huong Nguyen asked:
Debt is probably the number one destroyer of the average American family. More marriages end up in divorce over debt than anything else. People?s lives can be miserable because of the burden of debt they are carrying. The average American family is in debt to the tune of?Who cares about the averages? You are only concerned with your debt and ready to destroy debt and live debt free.
Once you enroll yourself with a debt consolidation services, the company sets to work by sending out proposals to your creditors, on your behalf. These proposals say that you have taken help from the particular debt consolidation company; and requests the creditor to co-operate. The letter has to have proof of your identity and genuine intention to pay-off the debts.
Debt consolidation agencies work by assessing your current debt situation and formulate a relevant plan, which you can carry out no matter what financial state you are in. All you need to do is look up a reliable debt consolidation agency and find a relevant report at its help desk
In many instances, debtors do not ask creditors for help and end up in the following trap: the creditors first raise the equated monthly emoluments–most of which comes from increased interest rates. When the debtor can’t pay off the increased interest rate, he is forced to pay a penalty. The actual dollar amount of the penalty will be negligible, but with his already-spiraling debt, the burden of those extra few dollars needlessly added will significantly add to his mental burden.
Debt settlement has been around for a while. The mission is to consolidate the debt amount altogether by 40% or more, reducing the principle amount by 40%, which means you pay only 60%. Consolidation services can save you up to 30%-45% of what you owe, but it can’t exceed the three-year limit. Make it a top priority to eradicate your unsecured debt as well, when you opt for consumer credit counseling. Get rid of your debt today by signing with the right debt company.
Debt consolidation agencies are set up to reduce your debts and interests. They help you by negotiating with your creditors on your own terms. Debt consolidation agencies make sure that your creditors are lenient with you and decrease your payload by almost 60%.
Taking their help gives your creditors a kind of guarantee that you intend to pay your debts and will not turn out to be a bad debt for them. This is the main reason that makes them agree to your consolidation services terms, even if those terms are more in your favor.
Debt consolidation agencies are not only interested in making money, but genuinely try to take you through your toughest financial crisis. They have very good and influential contacts with some of the creditors already, which makes your job easy and hassle free.
Debt consolidation programs will also charge high rates of interest for their services. There may even be a monthly charge attached to the plan. The best solution for resolving debt is to contact the creditors and ask for extensions on your repayment plans. Some creditors will negotiate, offering you lower fees if you pay the debt off sooner. Some creditors will even drop the debts owed, realizing that the chances of getting their money is nil. You never know until you ask.
The agency makes sure that the creditors straighten your credit points and show you as a bill-paying customer. This saves you face in the loan market. If the debt consolidation agency did not provide this service, then all the people in debt would have a tough time getting a loan.
While this is only a brief summary of how you can destroy debt, I suggest you learn more about these techniques and learn how you can eliminate debt, destroy your debt and live debt free.
www.debtneutralizer.com
For more information, please complete the Free Debt Evaluation form on the left or contact us at 714-585-2353 or debtneutralizer@gmail.com.
Debt is probably the number one destroyer of the average American family. More marriages end up in divorce over debt than anything else. People?s lives can be miserable because of the burden of debt they are carrying. The average American family is in debt to the tune of?Who cares about the averages? You are only concerned with your debt and ready to destroy debt and live debt free.
Once you enroll yourself with a debt consolidation services, the company sets to work by sending out proposals to your creditors, on your behalf. These proposals say that you have taken help from the particular debt consolidation company; and requests the creditor to co-operate. The letter has to have proof of your identity and genuine intention to pay-off the debts.
Debt consolidation agencies work by assessing your current debt situation and formulate a relevant plan, which you can carry out no matter what financial state you are in. All you need to do is look up a reliable debt consolidation agency and find a relevant report at its help desk
In many instances, debtors do not ask creditors for help and end up in the following trap: the creditors first raise the equated monthly emoluments–most of which comes from increased interest rates. When the debtor can’t pay off the increased interest rate, he is forced to pay a penalty. The actual dollar amount of the penalty will be negligible, but with his already-spiraling debt, the burden of those extra few dollars needlessly added will significantly add to his mental burden.
Debt settlement has been around for a while. The mission is to consolidate the debt amount altogether by 40% or more, reducing the principle amount by 40%, which means you pay only 60%. Consolidation services can save you up to 30%-45% of what you owe, but it can’t exceed the three-year limit. Make it a top priority to eradicate your unsecured debt as well, when you opt for consumer credit counseling. Get rid of your debt today by signing with the right debt company.
Debt consolidation agencies are set up to reduce your debts and interests. They help you by negotiating with your creditors on your own terms. Debt consolidation agencies make sure that your creditors are lenient with you and decrease your payload by almost 60%.
Taking their help gives your creditors a kind of guarantee that you intend to pay your debts and will not turn out to be a bad debt for them. This is the main reason that makes them agree to your consolidation services terms, even if those terms are more in your favor.
Debt consolidation agencies are not only interested in making money, but genuinely try to take you through your toughest financial crisis. They have very good and influential contacts with some of the creditors already, which makes your job easy and hassle free.
Debt consolidation programs will also charge high rates of interest for their services. There may even be a monthly charge attached to the plan. The best solution for resolving debt is to contact the creditors and ask for extensions on your repayment plans. Some creditors will negotiate, offering you lower fees if you pay the debt off sooner. Some creditors will even drop the debts owed, realizing that the chances of getting their money is nil. You never know until you ask.
The agency makes sure that the creditors straighten your credit points and show you as a bill-paying customer. This saves you face in the loan market. If the debt consolidation agency did not provide this service, then all the people in debt would have a tough time getting a loan.
While this is only a brief summary of how you can destroy debt, I suggest you learn more about these techniques and learn how you can eliminate debt, destroy your debt and live debt free.
www.debtneutralizer.com
For more information, please complete the Free Debt Evaluation form on the left or contact us at 714-585-2353 or debtneutralizer@gmail.com.
