What is preferred for the majority of government’s short-term borrowing?

The preferred option for the majority of a government's short-term borrowing is a line of credit. This financial instrument offers flexible access to funds, allowing governments to borrow as needed without having to go through the lengthy process of issuing bonds or other securities, which is typically reserved for longer-term financing.

A line of credit provides immediate availability of cash and can be drawn upon quickly, making it particularly advantageous for managing short-term cash flow requirements. It allows governments to cover operational expenses, handle unexpected financial shortfalls, or invest in opportunistic measures without the constraints associated with more complex borrowing methods.

In contrast, direct loans might involve more paperwork and commitments compared to the instantaneous access provided by a line of credit. Tax-exempt debt and reverse repos are primarily used for different purposes, often involving longer-term financing or specific investment strategies, not the short-term liquidity needs that a line of credit addresses.