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Current Governmental Financing Problems in Capital Markets

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Current Governmental Financing Problems in Capital Markets
Work Level   Master level
Type of Paper   Essay
Pages   2
Words  380
Published   25/05/2022

A capital market, which is either a primary or secondary capital market, is a security market including debts and equities, used by both business enterprises and governments to provide themselves with long-term finances, which are always issued for a duration of more than one year. This market is an integral segment in the financing system of different business enterprises and governments since it is an available market for both parties to meet their long-term needs. It represents all facilities and institutional arrangements necessary for borrowing funds and lending them, therefore having concerns about raising money capital for long-term investment purposes. The long-term capital is mostly demanded by agricultural sectors, manufacturing industries from private sectors, and government agencies.

Government Finance

Such funds are always obtained from banks, corporations, cooperate savings, individual savings, government agencies, insurance companies, non-bank financial institutions, and more importantly the government surplus. The contribution of the governments in the capital markets has always had a profound effect in transforming the economy as well as empowering and reviving business enterprises that are almost collapsing. It is as well very crucial in accelerating the regional development of venture capital sectors.

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The Government Financing Problems

However, several governments have recently faced a variety of problems with different impacts on the economy, including the stock market. This effect was much felt during the global economic recession that took place leaving the majority of countries hit with a terrible economic crisis, leading to currency depreciation in some countries, as such the capital market funding was therefore very hard to be obtained.

The failure of current governments to finance the capital markets has been attributed to several factors that directly or indirectly affect the finances and disposable income of individuals and organizations. International competitions have also been a source of capital market financing problems.

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