The national debt, also referred to as the public debt, represents the total amount of money that a country’s government owes to its creditors, including domestic and foreign lenders.

It is typically measured as a percentage of GDP to evaluate its size relative to the economy’s output.

Governments accumulate this debt by borrowing through bonds and other securities to cover budget deficits, funding expenditures on infrastructure, social welfare, defence, and other public services that exceed tax revenues.

Key implications of the national debt:

• Intergenerational burden: Repaying the debt falls on future generations via higher taxes or reduced public spending, potentially limiting their fiscal flexibility.
• Economic impacts: High debt levels can drive up interest rates as lenders demand compensation for risk, curbing private borrowing, investment, and consumption, which slows economic growth.
• Crowding out: Government borrowing competes with the private sector for funds in financial markets, elevating interest rates and reducing private investment.
• International reputation: Excessive debt signals fiscal weakness, undermining investor confidence, raising future borrowing costs, and risking credit downgrades.