On Government Borrowing - Essay Example

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On Government Borrowing

The government borrows majorly through issuing treasury bills, Canada Savings Bonds, and marketable bonds in domestic and foreign markets. The Financial Administration Act dictates that Governor in Council has the mandate to authorize the Minister to borrow money on behalf of Her Majesty in the right of Canada. The government borrowing has been too high and the interest is very low. The government Canada reported a net debt of approximately $ 616.9 billion in the fiscal year 2010-11. This was a rise by $ 34.4 billion from 2009-10. Canada’s total government net debt-to-GDP ratio hit 30.4 per cent in the year 2010 (Department of Finance of Canada, 2012). This paper will explore the issue of high government borrowing and low interest rates. It will give economic measures to tackle the problem in Canada. The level of government borrowing is crucial ingredient of fiscal policy and management of aggregate demand in any economy. When an individual government runs a budget deficit, it implies that in that fiscal year, total government spending exceeds total tax revenue. When a government experiences a deficit in its budget estimates, it has to borrow in order to bridge the gap. This forces the government to issue its debt as Treasury Bills and long-term government bonds through central bank. ...Show more

Summary

Government Borrowing Name Institution Government Borrowing Introduction The government of Canada recorded net lending and borrowing at -77.61 billions Canadian Dollars in the year 2009. This is according to International Monetary Fund (IMF). Canadian government projects that net lending and borrowing will be 0.26 billions Canadian Dollar in the year 2015…
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