Public Debt and the Covid-19 Pandemic: Reality and Interconnectedness

Abstract

In the process of fulfilling their functions and obligations, states often find themselves in a situation where their own financial resources are not sufficient to achieve the set goals and objectives.Under such conditions, in order to finance government expenditures and the formation of budget revenues, it is necessary to attract domestic and foreign loans, which leads to the emergence and growth of both domestic and foreign debt.

Borrowing in the face of globalization should not be considered a sensation.At the modern stage, capital has taken on the character of international mobility and it is constantly moving from country to country in order for its owner to make more profit.The unequal level of development of countries, their division into developed and developing countries gives the flow of capital movement in a largely one-way direction.

Effective management of public debt, including the external debt component, is essential to ensure Georgia's fiscal sustainability.Borrowing public debt is sound in the face of economic growth, but if payments for foreign debt services are growing faster than foreign exchange earnings, then there are problems with the balance of payments and the state budget.

The action of any government in obtaining loans is conditioned by its financial condition.The larger the volume of government loans, the higher the share of public debt to GDP, the deeper the financial crisis.The best indicator of public debt sustainability is its ratio to nominal GDP.