16 C E N T E R F O R WO M E N ' S G LO B A L L E A D E R S H I P quickly, often within a few months, while long-term bonds are repaid over a much longer period, often many years. Bonds are bought and sold in the bond market, and once the government issues a bond, it can be traded among investors in global markets. The price of the bonds varies with conditions in the bond market. If a government has difficulty finding investors willing to hold its bonds, the price of the bonds falls until they are sold. From the government’s point of view, lower bond prices means that borrowing has become more expensive, since the sale of bonds generates fewer resources. From the investors’ point of view, lower prices mean a higher rate of return, since the investor has to pay less money initially in exchange for the future payments the government must make as stipulated by the bond. It is important to recognize the difference between budget deficits and the public debt. Deficits represent how much is borrowed to cover the gap between revenues and expenditures in a particular budget. The total amount that a government borrows over time, i.e., the total outstanding amount owed to bondholders, is the public debt. The public debt represents a claim on future budgets, as interest has to be paid. In some cases, formal limitations exist that constrain the ability of governments to borrow. These restrictions may come from laws or constitutional restrictions and may only apply to a particular level of government, e.g., state, provincial, or local governments. Or the limitations may exist because donors place restrictions on the government’s ability to borrow as a condition associated with their financial support. KEY QUESTIONS: ■■ How do we judge whether borrowing is contributing in a sustainable way to resource mobilization or whether it is simply building up a mountain of debt that will reduce the resources available for human rights fulfillment in the future? ■■ What are the distributional impacts of financing government expenditures by borrowing? Debt and Assets To answer the above questions we need to look at the two sides of the balance sheet—liabilities on one side (i.e., borrowing) and assets on the other. In deciding whether borrowing can contribute to or hinder the realization of human rights, it is critical to consider whether the government is using the debt to finance the creation of assets that will help in the realization of economic and social rights. Conventional arguments on debt burdens frequently fail to address the asset side. In other words, if a government borrows, what assets will it be able to create that would not have been created otherwise? For example, borrowing to build a school generates social and economic benefits for future generations.