What does public debt represent?

Public debt represents the money a government owes to creditors. This debt is incurred when a government borrows funds to cover budget deficits, finance projects, or fund public services that exceed its revenue from tax collections and other income sources. Public debt can include bonds issued by the government to finance its operations, loans from international organizations, or other forms of credit.

When citizens, businesses, or foreign governments purchase these bonds or lend money to the government, they essentially extend credit. The government then agrees to repay this money, often with interest, over a specified period. The accumulation of such debts reflects the financial commitments that a government has to fulfill and can be a crucial aspect of its fiscal policy and economic management.

Understanding public debt is essential as it impacts the overall economy, influences interest rates, and affects future taxation and government spending capabilities.