2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
Capital accumulation plays an important role in the economic growth of any country. Internal sources are profits from various enterprises, the state budget, the savings of the population, and so on. They are supplemented by private and public funds that are attracted from other countries, a large share in this is occupied by international loans, which are the movement of loan capital occurring in the sphere of foreign economic relations. This is the provision of various resources (commodity and currency) under the conditions of their return, urgency.
The role of international loans
The essence of the considered economic category is manifested through a number of functions:
- Maintenance of commodity turnover.
- Redistribution.
- Concentration of capital.
- Cost savings.
In the performance of the above functions, international loans ensure the continuity of the process of expanded production, and also contribute to the strengthening of the unevenness that exists in the development of the economy. Some industries are encouraged, while others, on the contrary, are held back, it all depends on profitability. The boundaries of such loans are determined by the sources of funds, the existing need for them, the degreereturn them within a specified period. Violation of this entails a problem called external debt and needs to be resolved.
Highlights
Let's take a closer look at each function to evaluate international loans, their importance for the country's economy.
- When the service of commodity circulation is implemented, money circulation also accelerates, but cash is being squeezed out. Such instruments as credit cards, bills of exchange, checks are being actively introduced. Non-cash transactions come to the fore, this simplifies economic relations in the international and domestic markets. Commercial loans play a special role.
- The redistributive function lies in the fact that finances from certain areas are directed to others in order to make more profit.
- An important condition for stability in the development of the economy is the concentration of capital. International loans expand the scale of production, thus providing additional income.
- Economy of costs arising in circulation is achieved with the help of financial resources, which are temporarily released during the commercial and industrial circulation of capital. The time gap between spending and receiving funds determines the excess or lack of funds.
Classification of loans provided at the level of different countries
For a better understanding, consider the types of international credit:
- signature;
- banking;
- on specialback-to-back deals;
- mixed.
Company loan - a loan that is given by the exporter of a certain country to the importer of another state by deferred payment or as a commercial foreign trade loan. They are often realized through a promissory note or an open account.
A bank loan has some advantages when compared to a company loan. There is a choice of suppliers, the timing is better, in addition, good volumes are given at a good cost.
Loans under offset transactions - long-term foreign trade credits (10-15 years). The importer receives funds for the purchase of equipment and machinery, repaying the debt not with foreign exchange payments, but by supplying products.
A type of mixed loan is a foreign currency loan. It can be used in a wider aspect. Also, its forms are: factoring, leasing, forfeiting.
Forms of international credit are classified according to different criteria
- By source: foreign, mixed, domestic loans, foreign trade financing. They are linked.
- By purpose: financial, commercial and bridge loans. The former are aimed at construction, the purchase of securities, investment projects, as well as the repayment of external debts. The second are connected with foreign trade operations. The third loans are designed to work with mixed forms of export of capital, services, goods. For example, contract work.
- According to the currency of the loan, they can be in the monetary unit of the debtor or creditor, and also in the equivalent of a thirdcountries.
- Terms: ultra-short, may still be up to a year, from one to five years, more than 5 years.
- Guaranteed: blank or secured.
- On provision: financial, bond loans, acceptance, deposit certificates and others.
- Depending on the type of lender: interstate, government, private, mixed.
It is important to correctly use international credit in the economy for mutually beneficial cooperation between states.
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