Question

Explain the following methods of debt redemption:

Refunding

Discuss the following methods of debt redemption:

Refunding

Answer 1

• The procedure by which the government issues new bonds to settle the maturing bonds is known as refunding.
• As a result, the government takes out a new loan to pay back an existing one. In this instance, the debt’s financial burden is delayed until a later time rather than being liquidated.
• As a result, the overall debt load keeps growing. This approach is typically used when the government is temporarily unable to fulfil its outstanding debts.