Repayment of Public Debt:

Generally governments borrow huge amounts to finance expenditure both of developmental and non-developmental nature. A government, which borrows, has to repay the debt by imposing taxes. Even if it postpones the repayment of the principal amount, it does require paying the interest amount from time to time as per the prescribed terms at which it issued the bonds. The fact is that the government may postpone the repayment of the public debt once or twice but not indefinitely. As repayment and servicing of the debt demands imposition of additional doses of taxation, governments often defer the repayment of public debt. The government generally makes provisions for redemption of the debt when the bonds are issued. Now let us know briefly the meaning of such words as the refunding, redemption and repudiation before explaining various measure of repayment.  Refunding is a method in which the maturing bonds are replaced by new bonds. This process of refunding involves no liquidation of the money burden of public debt. This type of repayment gives the government temporary relief. On the other hand redemption means the outright repayment of a loan.  Repudiation is altogether different from redemption, though it is also one way of getting rid of the burden of a debt. In this case neither the interest nor the principal amount would be paid by the government. In other words, government in this case just refuses to honor the post debts. As repayment of the debts will have to be undertaken by rational government.