What Is the Public Debt?


Quick Answer

The public debt is the total amount of money that is owed by the government. The value changes on a daily basis, and it builds up or reduces in time. It builds up as a result of running the economy.

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Full Answer

When a government spends more than it earns in tax receipts and via other forms of revenue in a given year, it is said to have run a deficit. The opposite of this is when a government runs a surplus. This is where the tax collected and other revenues is worth more than the money spent.

Each deficit gets added to a figure called the public debt. It is also referred to as government debt or national debt. So, the public debt is the accumulated figure of all the deficits that have been run by governments down through the years, minus any money that has been repaid. Money is typically repaid when there is a surplus.

Governments raise the money to fund the public debt through several different methods. They include the sale of Treasury bills, notes, bonds and savings bonds. When a country has a weak credit rating it is not able to do this. In these situations, a country often has to go to organizations such as the World Bank in order to fund the public debt.

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