Domestic public bond’s debt: an alternative

Fabio Giamiagi () and Álvaro Antônio Zini ()

Brazilian Journal of Political Economy, 1993, vol. 13, issue 2, 171-195

Abstract: This article develops arguments in favor of recomposing the time to maturityof the domestic public bond’s debt and present calculations on the amount of tax required by different terms of payment of that debt, assuming that it is rescheduled. Two alternativesare presented and evaluated. Alternative one offers a collateral for the principal owed andcalculates the flow of interest in relation to GDP during the repayment period, Alternativetwo is based on making gradual and small down-payments to repay the old debt within anew institutional framework. The interest rate in the two cases would fluctuate and be readjustedeach semester. Both alternatives yield a substantial alleviation of the interest burdencompared to the present policy. The main conclusion is that with a dollar long-term interestrate similar to the ones observed in the international markets (about 8% a year) plus 2% ofcountry risk and a 3% a year GDP growth rate, the domestic public debt could be paid in 20years if a yearly provision of only 0.7% of GDP is allocated to its payment. The calculationsalso show that the required primary budget surplus would decrease to the range of 2.l% to2.7% of GDP, facilitating the balancing of the budget. JEL Classification: H63; E31.

Keywords: Public debt; stabilization (search for similar items in EconPapers)
Date: 1993
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