Comparison between Private and public Debt:

In certain respect s government borrowings resemble the private ones. Like a private borrower the government may also borrow either for consumption or for investment purposes. It will also be paying interest in such borrowings, but the dissimilarities between the two are more glaring

1) A private economic unit can not borrow internally that is to say; it can not borrow from itself. However the government usually borrows internally, that is from its own subjects and from within the country.

2) While a private economic unit can repay the debt either out of its earnings or out of its accumulated assets or by borrowing  from other sources (thus substituting one debt for the other), such need not be the case with the government. The government is the creator of currency and can pay its debt straight -away by creating more of it. The fact that it does not do so only reflects its concern for the welfare and stability of the economy and not the lack of power to do so. However, external debt can be  discharged in this manner only if it is repayable in local currency. But creation of domestic currency can not be the means of  repaying if the foreign debt is repayable in foreign currency or gold. In that case, foreign currency will have to be procured through export earnings or through some other means failing which gold will have to be paid out.

3) Public borrowings have a profound effect on various dimensions of the economy- distribution, capital accumulation, economic  growth, and income and employment stability and so on. This way public debt is both a source of problems and a tool of economic management in the hands of authorities.