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Questions
Explain the following methods of debt redemption:
Refunding
Discuss the following methods of debt redemption:
Refunding
Explain
Short Answer
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Solution
- 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.
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Chapter 30: Budget - EXAMINATION CORNER [Page 30.31]
