Unit 2: Public finance
Listen to a woman talking about Government debt and fill in the blanks in the
following text.
Government debt (also known as public interest, national debt and sovereign debt) is the
debt owed by a central government. (In federal states, "government debt" may also refer
to the debt (1) of a state or provincial, municipal or local government.) By contrast, the
annual "government deficit (2)" refers to the difference between government receipts and
spending (3) in a single year. A central government with its own currency can pay for its
spending by creating money ex novo (= from scrach). In this instance, a government
issues securities (4) not to raise funds, but instead to remove excess bank reserves
(caused by government spending that is higher than tax receipts) and 'create a shortage
(5) of reserves in the market so that the system as a whole must come to the Bank for
liquidity.' Governments create debt by issuing securities, government bonds and bills.
Less creditworthy countries sometimes borrow (6) directly from a supranational
organization (e.g. the World Bank) or international financial (7) institutions. As the
government draws its income from much of the population, government debt is an
indirect debt of the taxpayers. Government debt can be categorized as internal debt
(owed to lenders within the country) and external (8) debt (owed to foreign lenders).
Another common division of government debt is by duration until repayment is due.
Short term(9) debt is generally considered to be for one year or less, long term is for
more than ten years. Medium term debt falls between these two boundaries. A broader
definition of government debt may consider all government liabilities (10), including
future pension payments and payments for goods and services the government has
contracted but not yet paid.
