What is the public debt of countries, how does it work, and what is its status in the time of the Corona?

Religion is a very important element in the economy of any country, but we do not know how this is done and why countries resort to it, and how much is the debt of governments in the world? .. The answer in this report.

What is public debt?

"When we hear about public debt, we are talking generally about a set of fixed-income securities issued by the state or public agencies," says a report by the Spanish magazine "Moi Ngotheos e Economia".

It is a means of financing the activity of the state through the issuance of securities, which individuals, institutions or even other countries can obtain. Perhaps the most common forms of public debt are obligations, treasury bills, and bonds.

Keys to understanding debt .. How does it work?
The magazine pointed out that public debt is a popular and widespread method of financing public administrations. Its goal is to provide the necessary liquidity to achieve the goals set by government actions.

Debt transactions are issued on specific terms, based on the issuer's needs and objectives.

There are two large groups that must be taken into account in public debt, depending on who will acquire it:

The internal public debt in which local investors invest.

External public debt: in which transactions are based on foreign individuals, institutions or countries.

By classifying religion according to the conditions of its mission, we find three groups:

● Short-term issues: These are treasury bills and have maturities of less than one year.

● Mid-term bonds: They are the most common to fund the major activities of bond issuers.

● Long-term public debt : issued in the areas of large investments that will be made or in exceptional cases, a long-term debt that can vary over time periods.

Why is there a public debt?
The magazine added that debt transactions are linked to public deficits. When the state needs financing to increase spending, what it does to cover this excess spending is the increase in issuance of debt instruments.

The direct relationship between public debt and GDP is a key element in clarifying the need for debt.

When the division of public debt by GDP falls, what is obtained is the so-called administrative capacity to counter payments without issuing debt instruments.

And when there is a low percentage, the public sector generates sufficient resources to avoid having to issue more debt, but sometimes there are certain percentages that indicate that the state debt needs financing.

The magazine showed that the debt reflects the accumulated deficit until a certain period. The issuance of public debt responds to the needs derived from that accumulation.

In short, debt is a financing tool that helps countries achieve their financial goals and grow in case of need, and a pre-agreed return should be provided to the user, according to the issuance deadlines.

The size of government debt
According to a report by Standard & Poor's Global last February, the value of government debt worldwide will jump to a record $ 53 trillion by the end of this year, with a trend to borrow $ 8.1 trillion this year alone.

According to the report - which was issued at a time when the world is witnessing the spread of the Coruna virus - it will be about 70%, or $ 5.8 trillion of total sovereign borrowing, to refinance long-term debt due, but the expected new volume of borrowing of $ 2.3 trillion will still be equivalent to 2.6% At least of the global GDP.

Details of the new debt
The US would borrow $ 3 trillion and Japan $ 1.75 trillion would keep the two countries by far the largest in the world, as they make up nearly 60% of the total as a whole, according to the same report.

After the United States and Japan, China is expected to issue debt instruments at about 636 billion dollars, followed by Italy, Brazil and France, with each country expected to borrow 250 billion dollars in 2020.

These four countries will constitute about 17% of the global total, slightly less than Japan alone, while the Group of Seven major countries will account for nearly 70% of global borrowing and debt.

Meanwhile, the top twenty emerging economies are expected to issue combined debt instruments of $ 1.62 trillion this year, up 4% compared to 2019, to record a historically high level.

Function numbers
The Institute of International Finance said last November that global debt may have exceeded a record $ 255 trillion last year, equivalent to about 32,500 dollars per head of the world’s 7.7 billion people.

This number is more than three times the annual economic output of the world.

- Since the collapse of the American investment bank Lehman Brothers in 2008, governments have borrowed thirty trillion dollars, companies earned 25 trillion dollars, families borrowed nine trillion dollars, and banks received two trillion dollars, according to the Institute of International Finance.

Global bond markets rose from $ 87 trillion in 2009 to over $ 115 trillion today.

Government bonds currently constitute up to 47% of the market.

In contrast, the International Monetary Fund says that the global debt - public and private - has reached $ 188 trillion now, which is equivalent to 230% of global output.

The fund estimated that 43% of low-income countries are either at risk of debt distress or already in distress.

Debt and Corona virus
There is no doubt that the Corona virus will deepen the debt burden on countries, and raise the volume of debt worldwide to levels that exceed expectations.

Many countries - led by the United States of America (more than two trillion dollars) and European Union countries - have launched stimulus plans to counter the consequences of the virus, as well as central banks reducing interest rates to very low levels, in an attempt to stimulate the economy, which will open the door to more borrowing .