Reasons why Government borrow.

[TOZZIBLINKZ]

Just like human beings the government of a particular country needs money to carry out various governmental and political activities or practices , but in most cases this morning is not available for disposal thereby causing the government to have no other choice than to borrow from other government parastatal and economics . When government suffet deficit budgeting it may consider the act of borrowing money in order to finance and handle such budget like financial huge capital projects etc . to be more elaborate below are some of the reasons why Government borrow :

* Government borrow in order to reduce burden on taxpayers , and the choose to borrow money in order to execute this proposed project .

* Government borrow in order to meet cost of national emergencies , this is so true Because government can embark on borrowing to be able to meet the cost of national emergencies such as war , drought , famine , and hurricanes .

* Government also borrow in order to provide employment opportunities , yes government borrow in order to finance or establish certain projects capable of generating employment opportunities for the people . They build industries , refineries , statutory companies , and other government regulating firms .

 

[Jasz]

In order to understand why the government borrows, one must first understand what a "bond" is. A bond is a debt security offered for sale by private and public corporations (including the federal government) to investors in order to raise money for large capital expenditures. Bonds are typically issued with maturities of 20 years or more.

The reason the government borrows money has to do with an excess of spending over revenue. As mentioned before, the government's income comes from tax revenue, which is how much money it collects from taxes. The problem arises when the federal government spends more on projects and initiatives than it generates through its tax revenue.

The government borrows to finance its operations like:
1. To cover current budget deficits when receipts from taxes and other sources fall short of outlays.
2. To smooth out revenue flows over the business cycle, because tax revenue rises and falls with the economy.
3. To finance investments in infrastructure and other long-term government projects that have high upfront costs but low operating (or operating savings) costs.

When this happens—and it does quite often—the federal government needs to make up for that deficit.

To do so, they can either:

• Sell assets (such as buildings or land).

• Print more money (which is not ideal but has been done in the past).

• Borrow money from investors by selling bonds

 

[Kingsley]

Yes thats true, government borrows for a wide variety of reasons, first they always prepare a budget that outweighs their avenue resource all in a bid to carry out projects that is meant to put the state in it right frame, and to set the country in the part of prosperity, So most of the monies that is been borrowed by the governmentof a country are suppose to go into capital projects.

Capital project are projects that are designed to bepring about development to the country, this are proj like construction of good road, provision of portable water, provision of electricity, even construction of schools and building of housing facilities for the citizens of the country, then building of standard hospitals and setup a very good transportation systems, both on land and seas, all these projects and many other are what the money been borrowed are meant to to satisfy. Those project are been undertaken to empower the people and provide enabling environment where business can thrive the government will recover the amount been spent through taxation and other forms of duties.

But unfortunately not all the government in the world are faithful in doing so, some squander the borrowings.

 

[Caramelle]

Governments may borrow money to fund ambitious infrastructure projects. While spending should ideally be covered by taxes and savings, the government may consider construction projects to be of paramount importance to the progress of the country and may thus risk paying interest and bear the burden of debt to secure funds for infrastructure. Infrastructure projects stimulate the economy and generate jobs for many people and thus help lower unemployment and poverty rates.

Governments may also borrow money to fund their response to a national health emergency like the coronavirus pandemic. Many countries were caught unprepared by the pandemic and had to resort to foreign and domestic loans in order to support their health and medical programs as well as provide financial assistance to the marginalized sectors in times of lockdowns.​

 

[Abee111]

The reason why government borrow is that Governments may borrow to meet temporary needs, as when estimated revenue falls below or is exceeded by estimated expenditures. Nonetheless, many national governments incur such debt because of an unwillingness to limit spending or increase taxes for fear of the political consequences. Borrowing to finance public works, especially when widespread unemployment exists, is another source of public debt and is justified in part by their long-term social utility. The largest public debts are incurred to meet emergencies, such as war debts that arise when it is difficult to finance the extended activities of the government by new or increased taxes, or when the government must borrow abroad to finance the war effort..

Public debt is advantageous in that part of the national funds are secured at an interest rate lower than that provided to private industry and in that the financial operations of government are funded on a permanent basis. It may also have an expansionary effect on employment and production during times of high unemployment. The disadvantages are that unjustifiable projects may be undertaken because the full burden of payment is postponed; that the government's demands may become so large that the interest rate on government bonds will rise to the point where money is diverted from private enterprise; and that too great a debt may induce governments to depreciate currency or default on obligations.