International loans as an instrument used for the development of the country's economy

The accumulation of capital plays an important role for the economic growth of any country. Internal sources are profit from different enterprises, state budget, population accumulation and so on. Supplement to them are private and public funds that attract from other countries, a large proportion of this is occupied by international loans, which are a movement of loan capital, occurring in the sphere of foreign economic relations. This is the provision of various resources (commodity and currency) under conditions of their returnability, urgency.

The role of international loans

The essence of the considered economic category is manifested through a number of functions:

1. Maintenance of commodity turnover.
2. Redistribution.
3. Concentration of capital.
4. Saving costs.

When performing the above functions, international loans ensure the continuity of the expanded production process, and also contribute to the strengthening of the unevenness existing in the development of the economy. Some industries are encouraged, while others, on the contrary, are restrained, it all depends on profitability. The boundaries of such loans are determined by the source of funds, the existing need for them, the degree of their return in a certain period. Violation of this entails a problem that is called an external debt and needs to be settled.

Basic moments

Let's look at each function in detail to assess international loans, their importance for the country's economy.

• With the implementation of commodity turnover, there is also an acceleration of money circulation, but cash is being squeezed out. Actively introduced tools such as credit cards, bills, checks. Non-cash transactions come first, this simplifies economic relations in the international and domestic markets. A special role is played by commercial loans.
• The redistributive function is that the finances from certain spheres are sent to others in order to receive a greater 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 revenues.
• Savings of costs arising in circulation are achieved with the help of financial resources, which are temporarily released during the trading and industrial circulation of capital. The time gap between spending and receipt of funds determines the excess or lack of finance.

Classification of loans granted at the level of different countries

For a better understanding, consider the types of international credit:

• Company;
• bank;
• On special compensatory transactions;
• mixed.

A corporate loan is a loan that an exporter of a certain country gives to an importer of another state by deferring payment or as a commercial foreign trade credit. They are often sold through a bill or an open account.

A bank loan has some advantages, if you compare it with a branded one. There is a choice of suppliers, the timing is better, in addition, good volumes are given at a good price.

Loans for compensatory transactions are long-term foreign trade loans (10-15 years). The importer receives funds for the purchase of equipment and machines, paying off the debt not by currency payments, but by supplying the products.

A mixed loan is a currency loan. It can be used in a broader context. Also its forms are: factoring, leasing, forfeiting.

Forms of international credit are classified according to different characteristics

• By sources: foreign, mixed, domestic loans, foreign trade financing. They are related.
• By appointment: financial, commercial and intermediate loans. The first are aimed at construction, purchase of securities, investment projects, as well as repayment of external debts. The latter are related to foreign trade operations. Third loans are designed to work with mixed forms of export of capital, services, goods. For example, contract work.
• According to the loan currency, they can be in the monetary unit of the debtor or creditor, and even in the equivalent of a third country.
• On terms: super-short-term, still can be up to a year, from a year to five, more than 5 years.
• Under the guarantee: Blank or secured.
• By providing: financial, bonded 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 of states.