ABSTRACT
This chapter explains the modalities of financing the budget, and the principles of good management of the resulting debt. There is a conceptual distinction between government transactions that are undertaken for their own "autonomous" reasons, and financing transactions that are undertaken only as "compensatory" of the autonomous transactions. The distinction between financing and adjustment, between liquidity and solvency, is at the heart of the post-World War II international financial system, which was set up largely to prevent temporary liquidity crises from turning into permanent financial problems for the country concerned and everyone else. Debt owed to the international financial institutions was legally non-reschedulable, according to their charters. The types of risk to be addressed by debt management fall in three broad categories: market risk, commercial risk and operational risk. The four pillars of sound debt management are a debt management strategy, centralized control, an annual borrowing and repayment plan, and proper accounting.
