Principles of Public Debt Management:

According to Philips E.Taylor, public debt management should sub-serve three important principles:

a) The policies pursued must be able to extract from the public, without undue coercion, the necessary loans to finance a deficit or to replace maturing securities, and this should be done at the lowest feasible interest cost,

b) The entire transactions should serve the economic objectives of stable growth.

c) The debt should be so placed as to minimize the need to enter the market when it is inconvenient or unpropitious to do so.

However, we should admit that there exist conflicts among these objectives. It may be noted from the above first principle that debt management should be capable of providing the required amount from the lending market.  Also, loan amount need to be procured at reasonable cost as interest payments have a bearing on revenue account of the budgets.  The first principle also requires a number of debt instruments capable of tapping the loanable funds in the economy.  It also implies the freedom and maneuverability to offer the terms like maturities and interest rates.  Of course, this requires cooperation from the monetary authorities to create favorable money conditions. 

With regard to the second principle, debt management policy requires flexibility to achieve stable economic growth.  If the debt management policy, along with other economic policies, fails to achieve the price stability, it amounts to detracting the first principle also.  The third principle stated above can best be served by lengthening maturities like the British Consols which never mature.  In such a case retiring and refunding of debt takes place at the choice of the Treasury.