English_for_Finance_and_Banking
¨ READ AND DISCUSS
1. a) Supply the articles where necessary.
b) Write down 3-5 questions about the texts.
c) Compare the problems the two countries are trying to solve.
Financial Policy
… term is broad and its definition is likely to differ somewhat from country to country. On the widest definition, it covers … fiscal policy (budgetary policy, i.e. policy on government revenues and expenditures), monetary policy, credit policy and management of government debt. The core of financial is fiscal policy. Some economists believe that fiscal policy is synonymous with … state budgetary policy. There exists, however, … wider definition that would cover the policy on the level and composition of all central and local government revenues and expenditures.
Financial policy whose main goal is provision of financial resources for … implementation of … state programmes of economic and social development is part of … complex of economic policies influencing … level and pattern of economic activity and income distribution.
The economic policy of … Russian Federation is aimed at creating conditions fo sustained economic growth by reducing … inflation, by ensuring … free operation of markets of goods and factors of production, by achieving … balance of payments stability. These goals can be achieved mainly by elaborating and implementing … adequate fiscal policy.
The fiscal policy implemented these days in Russia presupposes first of all the reform of … federal budget. The ongoing budget reform includes … shift to the new budget classification, introduction of … better system of interbudgetary relations, changes of budget planning principles, shift to … treasury system of budget execution. Over … last few years the collection of tax revenue has tended to fall. Thus the Government’s fiscal adjustment programme provides for a package of measures aimed at increasing revenue collection through the reform. Attention is being paid to improvement of … tax legislation. The new tax administration system shall meet … following requirements: broad tax base, well-balanced system, equitable and transparent character, simplicity of administration. The main aim of … tax reform is to strengthen … budget, to provide financial resources for the budget system in the amount necessary to finance … state spendings for … state apparatus, for defence, health care, and … culture.
Words you may need:
management of government debt – управління державним боргом
core – серцевина
treasury system of budget execution – казначейська система виконання бюджету
2. a) Supply the articles where necessary.
b) Write down 3-5 questions about the texts.
c) Compare the problems the two countries are trying to solve
Fiscal Policy in the UK
Fiscal policy in … UK is guided by two strict rules:
… Government will borrow only to invest and not to fund current spending;
and
net public debts as … proportion of GDP will be held at … stable and prudent level.
These rules mean that … taxpayers pay for … current spending and require public borrowing to be kept under firm control.
The Finance Act 1998 established a new Code for Fiscal Stability, which requires fiscal and debt management policy to be carried out in accordance with five key principles:
§ transparency in setting fiscal policy objectives, the implementation of fiscal policy and the publication of the public accounts;
§ stability in … fiscal policy-making process and in … way that fiscal policy affects … economy;
§ responsibility in the management of the public finances;
§ fairness, including between … generations; and
§ efficiency in the design and implementation of fiscal policy, and in managing both sides of … public sector balance sheet.
In practice it means that the public finance and fiscal strategy in UK will be aimed at setting overall spending limits for individual departments and planning and controlling public expenditure more strictly within … framework of capital and current budgets.
3.a) Fill each gap with a suitable word from the box.
b) Sum up the text in 5-7 sentences and present your summary in class.
repaid
supply
occur
reliance
adversely
reduced
leads
bank
limit
Since the early 1970s quite a number of countries have been experiencing serious financial problems which have caused growing budget deficits.
Trying to find solutions to swollen budget deficits, governments undertake austerity programmes, work out harsh budget, implement macroeconomic stabilization, establish priorities for government spendings, analyse effects of different ways of financing their budget deficits.
In principle, budget deficits may be _____ by borrowing from domestic bank and nonblank sources, and from the rest of the world excessive ____ on any of these methods of finance may be dangerous because:
Government borrowing from central ____ directly affects the monetary base and the money ____. Excessive growth in the money supply leads to high inflation rates and balance-of-payments problems.
Substantial borrowing from the nonblank sector may ____ affect the structure of demand and growth potential. In particular, this borrowing may ____ the availability of resources to finance private investment. Such “crowding out” of private investment may ____ through the impact of government borrowing on domestic interest rates.
Reliance on external finance ____ to the accumulation of debt, which needs to be serviced and eventually _____.
A prudent fiscal policy permits a public deficits, but it must be maintained at a level consistent with other macroeconomic objectives: controlling inflation, promoting private investment, and maintaining external creditworthiness.
Words you may need:
austerity programme – програма жорсткої економії
harsh – жорсткий, суворий
“crowding out” – витіснення приватних інвестицій державними витратами
- a) Read and discuss the texts.
b) Write down five questions about each text.
It has become quite common for ministers of finance around the world to practice some variety of multiyear budgeting. For example, Canada, Germany and the United Kingdom all have multiyear expenditure plans which get reviewed and approved every year. In these countries, the starting point for the next year’s budget is the expenditure level approved for this year in the multiyear expenditure plan. Any changes to these previously approved levels have to be treated as additions to the budget, to be financed by raising total spending or by making offsetting changes in other programs.
In Germany, the annual budget is integrated in multiyear financial plan, which is presented to parliament at the same time the annual budget is presented.
The most important objective of multiyear financial plan is to monitor the possible existence of excessive demands on public resources.
In Canada, each year the federal government reviews and rolls forward the Fiscal Plan which comprises in more detail the current fiscal year and three more years. Each spending unit develops its own multiyear expenditure plan with the levels needed to keep the current level of services running for the next three years, which are then negotiates with the Treasury Board.
In the United Kingdom, the multiyear public expenditure survey also covers next three fiscal years.
Even when they do not have multiyear expenditure plans other countries carry out forecast of the financial consequences of current expenditures (for example, the future liabilities implied by increases in pension plans) or capital investment projects (such as future expenditure on maintenance and operation). For example, in Denmark, these is an appendix to the annual budget showing the expenditure level for the next three years.
Words you may need:
multiyear budget – багаторічний бюджет
offsetting changes – компенсаційні зміни
roll forward – переносити
- a) Read and discuss the texts.
b) Say what you know about the use of multiyear budgeting and budget classification in Ukraine.
Types of Budget Classification
A system of budget classification enables the myriad government operations and transactions to be organized into relatively homogeneous categories that facilitate the analysis of the impact, nature, and composition of revenues, expenditures, and other financing activities of government.
On the revenue, taxes are classified by the type of activity on which the tax is levied (income, sales, property and so on). Other current non-tax revenues are classified by the nature of the inflow, such as income from government property, sales proceeds, fines, and donations. Capital revenues are classified by the type of asset sold.
Grants are distinguished by whether they come from domestic or foreign governments and international institutions and whether they are for current or capital purposes.
On the expenditure, outlays are frequently classified by the responsible institution or organization. The two most useful types of classifications of government expenditures are the functional classification and the economic classification.
In functional classification, expenditures (and lending) are classified according to the main purpose or function, such as defense, education, and health. The three-level Classification of the Functions of Government published by the Statistical Office of the United Nations is commonly accepted. The value of functional classifications is that they permit analysis of trends in government expenditures even when the organizational structure of government changes.
The economic classification groups expenditures into current and capital and by whether they are required or unrequited; if required, for what kind of goods and services, and if unrequited, by the type of person or institution receiving the payment. The objective is to show the kinds of transactions through which the government performs its functions and their impact on markets, financial conditions, and the distribution of income. These transaction categories are wages and salaries, purchases of goods and services, interest on the debt, subsidies to enterprises, transfers to households and other governments, and lending.
One of the most useful ways to analyse government outlays is by means of the cross-classification by economic character and function. This classification reveals the means by which government performs its functions and the impact these activities will have on the rest of the economy.
Words you may need:
functional classification – функціональна класифікація
economic classification – економічна класифікація
cross-classification – перехресна класифікація
- a) Read the article quickly and underline the parts about the challenge the transition economies face and the constraints affecting the ability of the governments to meet the challenge.
b) Reread the article more carefully and pick out facts explaining the changes in the social sphere in comparison with the past and the recommendations of international experts.
Transition Economies Need to Reform Social Safety Nets
The former centrally planned countries undergoing economic transition have experienced a sharp decline in output, income and employment in recent years. This has resulted in severe hardships for many households, particularly the elderly, young children, and the unemployed.
In this adverse climate, transition countries now face the challenge of securing adequate resources for social protection. But the ability of governments to help identify the poor or administer targeted social protection programmes is undermined by severe financial and administrative constraints.
Unemployment and Underemployment. The collapse of output has drastically reduced labor demand, increasing open unemployment in some countries and underemployment in others. While registered unemployment throughout the region is low, total employment has declined.
The absence of normal labor market adjustment mechanisms in transitional economies further complicates the employment situation. For example, despite diminishing work opportunities in the formal sector, large numbers of employees choose to stick with their traditional employers in order to hold onto company-provided housing, education, and health benefits; an additional incentive to stay put is the inadequacy of unemployment compensation.
Financial Constraints. Prior to the onset of the reforms the governments of centrally planned economies controlled virtually all prices and wages; guaranteed employment for all, at least in principle; and provided universal public pensions, child allowances, and other benefits for sickness, maternity, and childbirth. But since the early 1990s, outlays for social protection in transition countries have come under increased financial pressure since revenue from payroll taxes – traditional source of funding for such programmes – began to fall.
Besides, the low statutory retirement ages for men and women have further reduced the number of working-age individuals.
On top of that the authorities have so far been unable to improve the distorted benefits structure. They still provide generous services with loose eligibility requirements, running from housing benefits to subsidized vacations. Paradoxically, welfare benefits are distributed among all instead of being given to the most needy.
Since the above trends have affected both the revenue base of social protection programs and the ability of these countries to target social benefits, international experts believe that to find a solution of social protection problem the transition economies will have to:
· reform eligibility and benefits standards governing the distribution of social benefits;
· raise statutory retirement ages;
· require individuals to vacate their last job on reaching retirement age;
· establish a more equitable distribution of social adjustment burdens across different population groups;
· broaden the tax base to include presently untaxed elements of labour compensation; increase the efficiency of expenditures in government programmes, including outlays for social protection, and prioritize them;
· work out effective targeting mechanisms for the provision of benefits.
Words you may need:
targeted program – цільова програма
to stay put – залишатись на місці; не змінювати місце роботи
onset – початок
child allowance – допомога на дитину
maternity – материнство
payroll taxes – податок на заробітну плату
statutory – встановлений законом
eligibility – застосовуваність (пільг), попадання (під пільги)
retirement age – пенсійний вік, вік виходу на пенсію
vacate – звільнювати
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