Four methods of repayment of public debt are:
(i) Terminable annuities: Government may pay the bondholders a certain fixed amount for a number of years to meet his debt obligations. These annual payments are called annuities.
(ii) Purchase of Government bonds in the security market. The Government may also purchase its own stock in the security market.
(iii) Budgetary surplus: A surplus increased in the Government surplus of aggregate revenue exceeds aggregate expenditure of the Government during any particular year. This budgetary surplus can be used by the Govt, to meet its debt obligation.
(iv) Export Surplus: If the export income of a country becomes more than its import payments then an export surplus is created. This leads to greater inflow of foreign exchange into the exchequer of the Govt. The Govt can use this foreign exchange reserves to meet its external debt obligation.
