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The National Consumer Council reports that 6 million families in the UK are already struggling to make
repayments towards their debt, and Citizens Advice reports that over the last 6 years, they have seen a 44%
increase in the number of people seeking debt advice. This may be just the tip of the iceberg. There must be
many families in the UK who have debt problems, but are not aware of the free help and advice available.
Tackling Debt
According to a DTI survey carried out in 2002, a household is likely to be over-indebted if:
People find it difficult to make repayments for a number of reasons. Generally, the underlying cause is some
kind of change in personal circumstances such as job loss, divorce, illness or a new baby. In these instances
some people may resort to more borrowing in order to pay creditors or household bills. This is not always the
best option.
Effects of Over-Indebtedness
The personal effect of struggling to repay debt can be far reaching. Sometimes a lack of financial awareness
can lead to stress, depression, anxiety, mental health problems, relationship breakdown and even suicide.
The Government recognise the need to raise financial awareness amongst the general public. The financial cost
of debt is not only on an individual level, but there is also a cost to society in general.
People who experience stress due to their situation, will probably seek advice from their GP and may take time
off work, therefore, this has an effect on already hard-pressed NHS and productivity due to absenteeism.
People who have had homes repossessed need to be re-housed, generally by the local Council. Those who seek
legal aid due to debt issues also incur a cost to the taxpayer.
Will raising financial awareness alone tackle the issues of debt problems? It helps for people who are already
struggling with debt, but are there other areas the Government should be looking at?
If you pay your creditors on time, regardless of what it takes to pay them, you are classed as a good payer and
therefore, not a risk when it comes to additional borrowing. In fact, your finances could be in turmoil and you
could be taking money from one card to pay another but you may still obtain even more credit.
The freedom creditors have to advertise loans, credit cards and mortgages could be challenged as well as how
decisions are made regarding lending.
If people, who are currently in financial difficulty, find they cannot borrow more money, they should be made
aware of the free financial advice that is available. Free Debt Management Companies such as
Payplan, http://www.payplan.com, can negotiate repayments with creditors so that monthly payments are
reduced and become more manageable.
Kadar perturnbuhan ekonorni Malaysia yang tinggi, pada paras lebih 8 peratus
setahun sejak lapan tahun berturut-turut kebelakangan ini menimbulkan tekanan
yang tinggi kepada inflasi di Malaysia. Kadar inflasi telah meningkat dari 0.4
peratus dalarn tahun 1985, ketika Malaysia mengalarni kernelesetan ekonorni terus
kepada 4.7 peratus dalarn tahun 1992 (Rajah 1). Walau bagaimanapun, kadar
inflasi menurun kepada 3.5 peratus pada tahun 1995 dan 3.6 peratus bagi sembilan
bulan pertarna tahun 1996. Setakat ini kadar inflasi di Malaysia masih boleh
dikatakan rendah dan adalah terendah jika dibandingkan dengan negara-negara
membangun yang lain (Rajah 2).
Ke atas
INDEKS HARGA PENGGUNA
Indeks Harga Pengguna (IHP) merupakan kaedah yang digunakan untuk mengukur
atau menentulkan kadar inflasi. IHP mengukur harga purata barangbarang dan
perkhidmatan yang biasanya digunakan oleh pengguna. IHP diukur dengan
membandinglkan purata harga barangan dan perkhidmatan pada tahun asas dengan
purata harga bagi tahun sernasa. Sementara itu kadar inflasi pula adalah peratus
perubahan paras harga barangan dan perkhidmatan tahun semasa berbanding tahun
asas. IHP mengambilkira lebih kurang 430 item barangan dan perkhidmatan yang
digunakan oleh seunit isi rumah secara am (average household expenditure).
Ke atas
KESAN-KESAN INFLASI
Inflasi banyak memberi kesan negatif kepada ekonomi dan penduduk sesebuah
negara. Kadar inflasi yang tinggi akan meningkatkan kos hidup rakyat dan ini akan
mengurangkan taraf hidup mereka. Agihan faktor-faktor pengeluaran juga tidak
cekap dan akan merugikan ekonomi berkenaan.
Bagi individu, inflasi akan mengurangkan pendapatan benar mereka. Keadaan ini
menjadi serius jika kadar kenaikan harga atau kadar inflasi jauh lebih tinggi
daripada kadar kenaikan pendapatan wang individu berkenaan. Pengurangan
pendapatan benar akan berlaku dengan ketara kepada pekerjapekerja yang
berpendapatan tetap.
Sewaktu ekonomi menghadapi inflasi, kesan
agihan amat dirasai. Bagi mereka yang
menabung,
yang menerima pencen, yang memiliki bon
dan polisi insuran, nilai sebenar (dalarn
eftikata kuasabeli wang) tabungan, nilai
pencen, nilai bon atau polisi insuran mereka
merosot. Ini kerana sewaktu inflasi, kadar
faedah benar adalah rendah dan mungkin
negatif berbanding dengan keadaan tanpa
inflasi. Bagi mereka yang berhutang dan yang memberi hutang agihan semula
pendapatan juga akan berlaku. Bagi yang berhutang, mereka beruntung kerana nilai
benar wang bayaran hutang yang dijelaskan sudah menurun berbanding keadaan
sebelumnya. Yang memberi hutang pula akan rugi kerana nilai benar bayaran
hutang yang diterima menjadi rendah daripada keadaan tanpa inflasi.
Inflasi juga akan memberi kesan kepada pelaburan dalam negara. Dengan
meningkatnya paras harga, pengeluaran barangan dan perkhidmatan yang dieksport
boleh kehilangan daya saing. Dengan kehilangan daya saing ini, pendapatan
eksport akan menurun dan ini akan mengurangkan pelaburan dalam industri-
industri berkenaan.
Ke atas
FAKTOR-FAKTOR YANG MEMYEBABKAN INFLASI
Secara umumnya, inflasi boleh disebabkan oleh mana-mana satu dari faktor-faktor
berikut atau kombinasi faktor-faktor ini :
1. Inflasi Tolakan Kos
Inflasi tolakan kos adalah disebabkan oleh kenaikan kos pengeluaran yang tinggi.
Kenaikan kos pengeluaran ini disebabkan oleh kenaikan harga bagi faktor-faktor
pengeluaran seperti tingkat upah. Sebagai contoh, jika kadar upah meningkat
dengan tinggi, maka kos pengeluaran akan meningkat.
Apabila kos pengeluaran meningkat, maka pengeluar yang sentiasa mahu
memaksimumkan keuntungan akan mengenakan harga yang tinggi kepada
pengguna. Selepas merasakan kesan kenaikan harga ini (penurunan dalam tingkat
pendapatan benar), pengguna yang juga bekerja (dianggap sebagai buruh) akan
meminta kenaikan gaji yang baru dan lebih tinggi bagi menampung peningkatan
harga ini. Jika permohonan mereka berjaya, kos pengeluaran akan meningkat dan
seterusnya pengeluar pula akan meningkatkan harga mereka. Tingkat harga umum
akan meningkat sekali lagi.
2. Inflasi Tarikan Permintaan
Inflasi tarikan permintaan berpunca daripada ketidakseimbangan antara jumlah
permintaan dengan jumlah penawaran barangan dan perkhidmatan dalam sesebuah
negara pada sesuatu masa tertentu. Jika berlaku peningkatan jumlah permintaan
yang tinggi berbanding dengan jumlah penawaran, maka inflasi akan wujud.
Keadaan ini wujud apabila peningkatan permintaan berlaku pada masa ekonomi
negara berada pada tingkat gunatenaga penuh. Apabila sesebuah ekonomi
mencapai gunatenaga penuh seperti yang Malaysia alami pada masa ini tingkat
pengeluaran sukar dinaikkan dengan cepat untuk menampung permintaan yang
melambung ini, sama ada oleh sebab kekata,n pasaran buruh atau pembekalan
barangan. Peningkatan jumlah permintaan pula boleh berpunca kepada:
a) Peningkatan Tinglkat Pendapatan
Peningkatan yang tinggi dalam permintaan agregat disebabkan oleh peningkatan
dalam pendapatan pengguna. Pendapatan yang tinggi ini akan meninggikan
kecenderungan pengguna untuk berbelanja dan ini akan meningkatkan jumlah
permintaan dalam sesebuah ekonomi. Pada kebiasaannya, peningkatan pendapatan
pengguna berlaku pada ketika ekonomi mengalami pertumbuhan yang tinggi.
b) Peningkatan Penawaran Wang
Penawaran wang yang banyak dalam sesuatu ekonomi boleh meningkatkan jumlah
permintaan dalam negara. Jika penawaran wang tidak dikawal, maka ekonomi pada
keseluruhannya mempunyai kadar kecairan yang tinggi dan ia akan meningkatkan
jumlah permintaan dalam negara. Jika terlalu banyak wang yang mengejar
barangan dan perkhidmatan yang sedikit, maka inflasi akan wujud.
3. Inflasi Diimport
Inflasi diimport boleh disebabkan oleh dua faktor: peningkatan harga barangan dan
perkhidmatan yang diimport dan penurunan kadar pertukaran asing.
i. Peningkatan Harga di Luar Negara
Inflasi boleh menyerap dalam sesebuah negara melalui import. Ini terutamanya
benar bagi sesebuah ekonomi terbuka seperti Malaysia yang banyak mengimport
barangan dan perkhidmatan dari luar negara. Jika hargaharga import ini meningkat,
maka ia akan memberi kesan kepada harga dalam negara.
ii. Penurunan Kadar Pertulkaran Wang
Inflasi import ini juga dipengaruhi oleh kadar pertukaran wang di antara Malaysia
dengan negara luar. Umpamanya, jika kadar pertukaran wang Malaysia dengan
Amerika jatuh (bermakna semakin banyak RM diperlukan untuk membeli satu
dollar Amerika), maka dengan secara langsung Malaysia terpaksa membelanjakan
banyak wang untuk mendapat sejumlah barangan dan membayar dengan harga
yang tinggi. Tentunya harga yang tinggi ini akan dikenakan ke atas pengguna
dalam negara.
4. Jangkaan Pengguna
Inflasi juga dipengaruhi oleh jangkaan pengguna.
Jika pengguna membuat jangkaan yang harga akan naik pada masa hadapan,
mereka akan berbelanja sekarang dan ini akan menambah jumlah permintaan
dalam sesuatu ekonomi. Seterusnya, ini akan memberi peluang kepada pengeluar
untuk mengambil kesempatan untuk meningkatkan harga.
Secara umumnya, inflasi boleh disebabkan oleh mana-mana satu dari faktor-faktor
berikut atau kombinasi faktor-faktor ini :
1. Inflasi Tolakan Kos
Inflasi tolakan kos adalah disebabkan oleh kenaikan kos pengeluaran yang tinggi.
Kenaikan kos pengeluaran ini disebabkan oleh kenaikan harga bagi faktor-faktor
pengeluaran seperti tingkat upah. Sebagai contoh, jika kadar upah meningkat
dengan tinggi, maka kos pengeluaran akan meningkat.
Apabila kos pengeluaran meningkat, maka pengeluar yang sentiasa mahu
memaksimumkan keuntungan akan mengenakan harga yang tinggi kepada
pengguna. Selepas merasakan kesan kenaikan harga ini (penurunan dalam tingkat
pendapatan benar), pengguna yang juga bekerja (dianggap sebagai buruh) akan
meminta kenaikan gaji yang baru dan lebih tinggi bagi menampung peningkatan
harga ini. Jika permohonan mereka berjaya, kos pengeluaran akan meningkat dan
seterusnya pengeluar pula akan meningkatkan harga mereka. Tingkat harga umum
akan meningkat sekali lagi.
2. Inflasi Tarikan Permintaan
Inflasi tarikan permintaan berpunca daripada ketidakseimbangan antara jumlah
permintaan dengan jumlah penawaran barangan dan perkhidmatan dalam sesebuah
negara pada sesuatu masa tertentu. Jika berlaku peningkatan jumlah permintaan
yang tinggi berbanding dengan jumlah penawaran, maka inflasi akan wujud.
Keadaan ini wujud apabila peningkatan permintaan berlaku pada masa ekonomi
negara berada pada tingkat gunatenaga penuh. Apabila sesebuah ekonomi
mencapai gunatenaga penuh seperti yang Malaysia alami pada masa ini tingkat
pengeluaran sukar dinaikkan dengan cepat untuk menampung permintaan yang
melambung ini, sama ada oleh sebab kekata,n pasaran buruh atau pembekalan
barangan. Peningkatan jumlah permintaan pula boleh berpunca kepada:
a) Peningkatan Tinglkat Pendapatan
Peningkatan yang tinggi dalam permintaan agregat disebabkan oleh peningkatan
dalam pendapatan pengguna. Pendapatan yang tinggi ini akan meninggikan
kecenderungan pengguna untuk berbelanja dan ini akan meningkatkan jumlah
permintaan dalam sesebuah ekonomi. Pada kebiasaannya, peningkatan pendapatan
pengguna berlaku pada ketika ekonomi mengalami pertumbuhan yang tinggi.
b) Peningkatan Penawaran Wang
Penawaran wang yang banyak dalam sesuatu ekonomi boleh meningkatkan jumlah
permintaan dalam negara. Jika penawaran wang tidak dikawal, maka ekonomi pada
keseluruhannya mempunyai kadar kecairan yang tinggi dan ia akan meningkatkan
jumlah permintaan dalam negara. Jika terlalu banyak wang yang mengejar
barangan dan perkhidmatan yang sedikit, maka inflasi akan wujud.
3. Inflasi Diimport
Inflasi diimport boleh disebabkan oleh dua faktor: peningkatan harga barangan dan
perkhidmatan yang diimport dan penurunan kadar pertukaran asing.
Kempen melalui media cetak dan elektronik ini adalah bertemakan "Inflasi Sifar
Sasaran Kita".
Inflasi Sifar
Inflasi sifar bermakna sesuatu keadaan di mana tidak berlaku apa-apa kenaikan
pada Indeks Harga Pengguna tahun semasa berbanding dengan Indeks Harga
Pengguna tahun asas. Dalam keadaan ini paras harga kekal dan tidak berubah bagi
tempoh masa tertentu.
Takrifan Inflasi Sifar Dalam Kempen Anti Inflasi Kerajaan
Sementara itu inflasi sifar dalam konteks Kempen Anti Inflasi yang dilaksanakan
oleh kerajaan adalah merujuk kepada usaha-usaha kerajaan mengekalkan paras
harga bagi barangan dan perkhidmatan perlu yang biasanya digunakan oleh
sebahagian besar rakyat di negara ini terutamanya bagi mereka yang berpendapatan
rendah seperti barang makanan, pengangkutan bas, teksi, kos rumah murah, sewa
rumah murah, utiliti dan sebagainya.
Peranan Pengguna Dalam Menangani Masalah Inflasi
Pengguna mempunyai peranan yang penting
dalam melawan inflasi. Dengan kebijaksaan
yang ada, pengguna boleh mencorak semula
perbelanjaan mereka sewaktu ekonomi
berada dalam keadaan inflasi. Pengguna
boleh mengurangkan paras perbelanjaan
dengan berbelanja ke atas barangan dan
perkhidmatan yang perlu sahaja. Pengguna
tidak perlu mempunyai jangkaan inflasi yang
boleh memburukkan keadaan. Dalam keadaan-keadaan tertentu, pengguna boleh
juga mencari barangan atau perkhidmatan pengganti yang lebih murah harganya.
Kempen Anti-Inflasi serta program-program yang lain bertujuan mendidik
pengguna tentang hak-hak pengguna, tentang pengurusan ekonomi rumah tangga
dan tentang bahaya inflasi. Nasihat kepada pengguna ialah sebelum berbelanja
mereka haruslah:
merancang perbelanjaan
dapatkan nilai bagi wang
elakkan perbelanjaan berlebihan
Krisis kewangan yang mula-mula melanda di Negara Thai turut dirasai oleh Malaysia
pada kemudiannya. Ketidakstabilan dalam kadar pertukaran asing telah menyebabkan
negara-negara yang tidak mempunyai rizab asing yang kukuh tidak mampu
mempertahankan nilai matawang mereka dalam pasaran spekulasi. Pada 2 Julai 1997,
kerajaan Thai membiarkan nilai Baht merosot dan begitu juga dengan kerajaan Indonesia
yang mengumumkan kejatuhan nilai Rupiah yang mendadak pada 11 Julai 1997.
Pada permulaan krisis ini, Malaysia cuba mengekalkan nilai ringgit terhadap matawang
asing. Bagaimanapun, langkah ini tidak kekal lama memandangkan ia melibatkan kos
yang tinggi. Di antara tempon 14 Julai 1997 hingga 7 Januari 1998, nilai ringgit telah
jatuh dari RM2.50 terhadap US$1 kepada RM4.88 terhadap US$1. Tahun 1998
memperlihatkan kesan krisis ke atas ekonomi Malaysia. Pertumbuhan KDNK merosot dari
sekitar 7 peratus pada tahun 1997 kepada sekitar negatif 7 peratus pada tahun 1998.
Ekonomi negara berada dalam kedudukan yang lemah memandangkan sektor korporat
mengalami kesukaran dalam mendapatkan kredit dan pada masa yang sama mengalami
peningkatan hutang yang semakin tinggi.
Pengeluaran ouput adalah rendah di semua sektor yang utama dan perbelanjaan
pengguna juga adalah lemah. Projek infrastruktur yang besar yang berjumlah lebih
daripada RM60 billion seperti Bakun hydro-electric dam, Northern Region International
Airport, Highland Highway dan Kuala Lumpur Linear City terpaksa ditangguhkan. Di
bawah pengukuran belanjawan yang ketat, menteri-menteri dan pegawai kerajaan
menghadapi potongan gaji.
Dari segi Imbangan Pembayaran, kejatuhan nilai Ringgit meningkatkan jumlah eksport
dan mengurangkan jumlah import. Secara tidak langsungnya, ia mengurangkan saiz
defisit dalam akaun semasa. Bagi sesetengah produk seperti minyak petroleum yang
diniagakan dalam nilai US dollar, kita menampakkan satu peningkatan yang mendadak
dalam hasil pendapatan negara dalam nilai Ringgit. Sebahagian besar daripada barangan
eksport Malaysia terdiri daripada barang industri dan ia telah menyumbang kepada 80
peratus daripada jumlah eksport negara. Bagaimanapun, faedah yang dinikmati daripada
barangan eksport ini adalah terhad walaupun nilai Ringgit adalah rendah. Skel
pengeluaran yang sederhana menyebabkan banyak firma tidak sempat mengambil
kesempatan yang sedia ada untuk meningkatkan outputnya dan dieksport walaupun
mereka telah beroperasi pada tahap yang sepenuhnya.
Ekonomi terlampau bergantung kepada sistem perbankan untuk mendapat dana. Dalam
sektor perbankan, walaupun berlakunya penurunan dalam pertumbuhan deposit, namun
aktiviti pinjaman masih diteruskan. Ini menyebabkan risiko sistematik tinggi dan berlaku
funding mismatch kesan daripada fenomena lend long (pinjaman jangka panjang) serta
borrow short (deposit jangka pendek) oleh bank. Pada September 1997, sektor
perbankan dikatakan mengalami liabititi eksternal sebanyak RM6 billion.
Kejatuhan dalam pasaran stok dan matawang menyebabkan pelabur asing kehilangan
keyakinan untuk melaburkan modal di Malaysia. Malahan pelabur-pelabur yang sedia ada
telah membawa keluar duit Ringgit untuk disimpan di bank-bank luar. Dalam keadaan
yang kekurangan sumber untuk memberikan pinjaman kepada pihak awam, kadar bunga
terpaksa ditolak ke tahap yang tinngi. Bank Negara cuba mengelakkan kenaikan kadar
bunga dengan menurunkan syarat nisbah rizab dan pada masa yang sama, mencurahkan
sebahagian daripada rizab wang ke dalam pasaran wang domestik. Secara tidak
langsungnya, dikatakan usaha kerajaan dalam mempertahankan kenaikan kadar bunga
telah menyebabkan sistem perbankan meningkatkan pergantungannya ke atas pinjaman
asing jangka pendek. Walaupun kerajaan mengatakan hutang luar Malaysia adalah
antara yang terendah di negara Asia yang dilanda krisis kewangan, namun, harus diingat
bahawa hutang dalaman Malaysia pula adalah antara yang tertinggi di rantau Asia.
Deregulation is a hot-button issue for many government officials and big businesses. This is because it is one of those issues
where it seems that you cannot please everyone. Like anything else in life, when the rules are bent, it brings advantages to
some who had a hard time being successful with the initial rules, while it may place a handicap on others who found a way
to be successful despite these initial rules.
Defintion
1. Every industry has certain rules and regulations that it must abide by. These rules are created by industry
associations and watchdogs, as well as the government. Deregulation occurs when the government pulls back from the
industry a bit, therefore loosening its grip on particular rules and regulations.
Purpose
2. The purpose of deregulation is to allow a particular industry to foster greater competition, create a freer
marketplace and hopefully spur economic growth both within that marketplace and in general. When industries become
deregulated it gives that industry's players greater leeway in which to improve their products, craft their brand and,
ultimately, appeal more to consumers.
Advantages
3. When deregulation works, there are numerous advantages--most of them to the consumer in the form of lower
prices, more providers and better products. A company that was not doing so well and maintained only a small market share
before deregulation would also be likely to benefit from this act. When the company faces fewer restrictions, it might be able
to explore avenues that the government had previously not allowed or severely restricted. With less red tape, this company
could theoretically emerge from deregulation much more successful than it was before.
Disadvantages
4. A company that was doing quite well on its own despite government regulations would definitely see deregulation
as a downside, as it will make the rules lax for its competitors. In essence, a successful company might view deregulation as
a way of handicapping the competition, or allowing the competition to play by fewer rules in order to give it a fairer shot.
This easing of rules can also lead to a breakdown within the entire industry as different players use this flexibility to their
advantage--though it can ultimately end up being to their disadvantage. Such was the case in the 1980s when the savings and
loan industry was deregulated. This deregulation allowed S&L institutions to act more like banks and adopt a federal charter
instead of a state charter, thus increasing their capabilities and the number of institutions banks would have to compete with.
One of the major acts that ushered in this era of deregulation was the Depository Institutions Deregulation and Monetary
Control Act (DIDMCA), which was enacted in March 1980. This act made it possible for S&Ls to offer their customers
more attractive interest rates on savings accounts, increase the limit on deposit insurance by 250 percent, and relax their
restrictions somewhat on who could obtain a loan for developing, acquiring or constructing property. After the DIDMCA,
and a number of other acts and reforms, gave the S&L industry significantly more autonomy to operate as it pleased, the
industry began to collapse as lending got out of hand. The industry was so deregulated that lenders started approving their
own loans, as well as those of unqualified borrowers who wanted large sums of money for risky ventures. Before too long,
the S&L industry had lent much more money than it should have, leading to an estimated $150-billion government bailout.
Example: Airline Deregulation
5. The airline industry underwent deregulation in 1978 when the Airline Deregulation Act was signed into law. The
purpose of this deregulation was to allow the airline industry and its companies to gain more control over where they wanted
to fly and how much they wanted to charge. This fostered creativity among the industry's competitors as they looked for
bigger and better ways to outdo each other to increase their market shares. Consumers benefited from this, as they now had a
choice of more routes and destinations as well as lower fares--a win-win from their standpoint. According to a Government
Accountability Office report from 1999, fare prices between 1979 and 1988 dropped between 5 and 9 percent (depending on
airport size), and they continued to drop into the 1990s.
Government resources previously used for subsidizing petroleum products will be freed to undertake more
developmental projects and programmes such as construction of good roads, clinics, hospitals, schools,
and provision of good drinking water etc., for the benefit of the general public and especially the rural poor.
The private sector is the engine of growth and deregulation has the potential to increase private sector
participation in the petroleum industry to boost the national economy.
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As with most economies, Malaysia has been affected by the global financial crisis
and some reports suggest that Asia has been affected more than western countries.
Malaysia, being a small open economy with a strong export-dependent
manufacturing sector, has been particularly vulnerable.
A well-developed capital market comprising the equity and bond markets, provides a
source of medium and long-term capital for corporates. With the evolution of a more
diversified financial system, the capital market has assumed an increasingly
significant role in mobilizing and allocating resources to finance capital expenditures
in both the public and private sectors.
The capital outflows from Malaysia increased with the onset of the crisis. Investment
outflows that were high in the second half of 2007 (about MYR 21.9bn (USD 6.4bn))
slowed in the fourth quarter of 2008 to MYR 5.6bn (USD 1.7bn).
Although foreign direct investment (FDI) increased it did not compensate for portfolio
outflows during the same period.
The crisis has also prompted a drop in the value of Malaysia’s foreign reserves.
Although Malaysia’s reserves have been high in the years following the 1997 crisis,
the present crisis has taken its toll on reserves. The declines in FDI, foreign
reserves, and portfolio funds had been cushioned by the relatively stable current
account balance but this dropped drastically in the fourth quarter 2008.
In the life insurance market, whilst assets increased by 6.7% in 2008 it was the
lowest increase for many years. Average growth over the five years has been 12.8%.
The life insurance industry has continued to play a key role in providing institutional
support for the development of the capital market. This is reflected in the significant
investments in corporate and debt securities which accounted for 51.2% of total fund
assets at the end of 2008. The bulk of these investments are in private debt
securities. The net investment yield in 2008 was 4.6% (excluding capital gains),
down from 5.5% in 2007.
Demand from life insurers for long-term securities to match long-term liabilities
remained strong.
With the liberalization of the foreign exchange administration rules from 1 April 2005
insurers have been increasing their share of foreign assets, although as a
percentage this remains small at 1.4% in 2008.
The situation was somewhat different in the takaful market where total assets
increased by 20.2%. A substantial portion of takaful funds are placed in Islamic
private debt securities and the Islamic money market. The yield achieved in 2008
was 3.4%.
Read more: http://www.brighthub.com/money/investing/articles/68165.aspx#ixzz0uc0tLREK
Debt is that which is owed. A person who owes debt is called a debtor. A person to whom it's owed is called
a creditor. Debt is used to borrow purchasing power from the future. Debt issuance is related to the
human lifespan.
Contents [hide]
1 Payment
2 Types of debt
4.3 Cancellation
5 Effects of debt
8 See also
9 External links
Payment
People or organisations often enter into agreements to borrow something. Both parties must agree on
some standard of deferred payment, most usually a sum of money denominated as units of a currency, but
sometimes a like good. For instance, one may borrow shares, in which case, one may pay for them later with the
shares, plus a premium for the borrowing privilege, or the sum of money required to buy them in the market at
that time.
Types of debt
There are numerous types of debt obligations. They include loans, bonds, mortgages, promisary notes,
and debentures. It is very common to borrow large sums for major purchases, such as a mortgage, and pay it
back with an agreed premium interest rate over time, or all at once at a later date. The amount
of money outstanding is usually called a debt. The debt will increase through time if it is not repaid faster than it
grows. In some systems of economics this effect is termed usury, in others, the term "usury" refers only to an
Large organisations can break their debt into many small units of debt, known as bonds. Each bond entitles the
holder to the remaining repayments on that unit of debt. Bonds can be traded during the repayment period, and
Because bonds are traded on the bond market, they have a fluctuating price. This implies that the overall debt
represented by the total number of any particular type of bond also has a fluctuating price.
As noted above, debt is normally denominated in a particular monetary currency, and so changes in the valuation
of that currency can change the effective size of the debt. This can happen due to inflation or deflation, so it can
happen even though the borrower and the lender are using the same currency. Thus it is important to agree on
standards of deferred payment in advance, so that a degree of fluctuation will also be agreed as acceptable. It is
The form of debt involved in banking gives rise to a large proportion of the money in most industrialised nations
between inflation, deflation, the money supply, and debt. Thestore of value represented by the entire economy of
the industrialized nation itself, and the state's ability to levy tax on it, acts to the foreign holder of debt as a
guarantee of repayment, since industrial goods are in high demand in many places worldwide.
Borrowing and repayment arrangements linked to inflation indexed units of account are possible and are used in
some countries. For example, the US government issues two types of inflation indexed bond - TIPS and I-bonds.
These are one of the safest forms of investment available, since the only major source of risk - that of inflation - is
eliminated. A number of other governments issue similar bonds, and some did so for many years before the US
government.
In countries with consistently high inflation, ordinary borrowings at banks may be inflation indexed also.
Lendings to stable financial entities such as large companies or governments are often termed "risk free" or "low
risk" and made at a so-called "risk free interest rate". This is because the debt and interest are highly unlikely to
be defaulted. A textbook example of such risk-free interest is a government bond of US government - it yields
you the minimum return available in economics, but you get the security of the knowledge that US has never
defaulted on it's debt instruments. A risk-free rate is commonly used in setting floating interest rates, floating
interest rate is usually calculated as risk-free interest rate plus a bonus to the creditor based on the
(Next paragraph is only valid for investors investing in _foreign_ risk-free debt instruments)
However if the value of a currency has changed in the meantime, the purchasing power of the money repaid may
vary considerably from that which was expected at the commencement of the loan. So from a practical
investment point of view, there is still considerable risk attached to "risk free" or "low risk" lendings, even though
in terms of the amount of a currency that will be returned there may not be.
The Bank for International Settlements is an entity that sets rules to define what loans qualify as "risk free" or not.
It is a very powerful institution, formed by the Bretton Woods agreements, which has had a pivotal position
Debt of countries as well as private corporations is rated by rating agencies, s.a. Moody's, A. M. Best
and Standard and Poors. These agencies assess the ability of the debtor to honor his obligations and accordingly
give him a credit rating. Moody's for example uses the letters Aaa Aa A Baa Ba B Caa Ca C, where ratings Aa-
Caa are qualified by numbers 1-3. Munich Re, for example, currently is rated Aa3(as of 2004). S&P and other
rating agencies have slightly different systems using capital letters and +/- qualifiers.
A change in ratings can strongly affect a company, since its cost of refinancing depends on its creditworthiness.
Bonds below Baa/BBB (Moody's/S&P) are considered junk- or high risk bonds. Their high risk of default is
compensated by higher interest payments. Bad Debt is a loan that can not (partially or fully) be repaid by the
debtor. The debtor is said to default on his debt. These types of debt are frequently repackaged and sold below
face value.
Cancellation
Short of bankruptcy, very often debts are wholly or partially forgiven. Traditions in some cultures demand that this
be done on a regular (often annual) basis, in order to prevent systemic inequities between groups in society, or
International Third World debt has reached the scale that many economists and Christians are convinced that
debt cancellation is the only way to restore global equity in relations with the developing nations.
Effects of debt
Debt allows people and organisations to do things that they otherwise wouldn't be able or allowed to. Commonly
people in industrialised nations use it to purchase houses, cars and many other things too expensive to buy with
cash on hand. Companies also use debt in many ways to leverage the investment made in their private equity.
This leverage, the proportion of debt to equity, is considered important in determining the riskiness of an
the Great Depressionthere was deflation, which effectively made debt throughout society grow. This resulted in a
contraction of consumption since the borrowers were on average people who had to consume less due to the
increased proportion of their earnings going towards repayments while the lenders were on average people who
would invest their extra purchasing power. The reduction in consumtion reduced business activity and caused
further unemployment. Also in a direct sense, more bankruptcies occurred due to increased effective debt than
It is possible for some organisations to enter into alternative types of borrowing and repayment arrangements
which will not result in bankruptcy. For example, companies can sometimes convert debt that they owe
into equity in themselves. In this case, the lender hopes to regain something equivalent to the debt and interest in
the form of dividends and capital gains of the borrower. The "repayments" are therefore proportional to what the
borrower earns and so can not in themselves cause bankruptcy. Once debt is converted in this way, it is no
There are many arguments against debt as an instrument and institution, on a personal, family, social, corporate
and governmental level. Economics criticism focuses on debt fostering inequality. Religious critics contend
the ethical issues connected with debt, especially the element of luck, while Feminism concentrates on the
perceived coercive nature of debt contracts. Environmental critics point out the disparity between material use
of resources from economic growth and the limited resources of natural production. Examples would be the
low ecological yield of natural resources and the limited usable energy from the sun.