Public borrowing, also known as public debt or government debt, is the total amount of money that a government borrows to finance its expenditures when its revenue is insufficient. This borrowing can be from domestic or foreign sources and is often done by issuing government securities such as bonds, notes, and treasury bills
. Governments borrow to cover budget deficits—situations where government spending exceeds revenue—and to finance large projects like infrastructure or stimulative economic measures. Borrowing allows governments to spend today while promising to repay the borrowed amount with interest in the future
. Public borrowing can be classified as:
- Internal debt : Borrowing from lenders within the country.
- External debt : Borrowing from foreign lenders
The debt instruments vary by maturity, ranging from short-term (a few days to five years) to long-term (up to 30 years or more), affecting their liquidity and how quickly they can be converted into cash
. Historically, public borrowing has been central to state formation and economic development, enabling governments to fund wars, infrastructure, and public goods. It also facilitated the rise of democratic institutions and private financial markets
. In summary, public borrowing is the government's act of raising funds by borrowing to meet expenditures beyond its current income, with obligations to repay lenders over time
