What is public debt?

Public debt consists of outstanding liabilities arising from past borrowing by government or the public institutions covered by a statistic. Coverage can differ between measures. Maturity, currency, interest structure and repayment capacity matter alongside the amount owed.

Main characteristics of public debt

1. Stocks and flows Debt is measured at a date; a budget deficit is the difference between revenue and expenditure during a period. Deficits may increase debt, but debt changes need not equal the deficit. Exchange-rate valuation, asset transactions and accounting adjustments can also change the stock. 2. Domestic and external debt International statistics generally define external debt by the creditor’s residence. Foreign-currency denomination and foreign creditor residence are different concepts. A foreign investor can hold a local-currency bond, while a resident institution can hold foreign-currency debt. 3. Gross and net measures Gross debt focuses on liabilities. Net measures may deduct particular financial assets, whose coverage must be explained. Illiquid assets cannot necessarily meet near-term payments as readily as cash.

How is debt sustainability assessed?

4. The debt-to-GDP ratio This relates debt to the size of the economy and changes when either debt or nominal GDP changes. There is no identical safe threshold for every country. Revenue-raising capacity, financial depth and confidence affect the assessment. 5. Maturity, interest and currency risk Large near-term payments can increase refinancing risk. Variable-rate debt is exposed to interest-rate rises; foreign-currency debt is exposed to exchange-rate movements. Investor composition and potential obligations from guarantees also matter. 6. The purpose of borrowing Productive investment may support future output and revenue, but not every project succeeds. Sustainability does not simply mean eliminating all debt. It concerns meeting obligations on reasonable terms without repeatedly throwing essential public services into crisis.