Management of Public Debt:

Public debt has an important role to play in making good the deficit whenever the current expenditure exceeds the aggregate revenues of a government.  It helps to mobilize the savings of the community and keep the inflation under check.  Moreover debt resources are necessary in a developing country to finance economic development.  For instance, the government of India used  public borrowing on a massive scale to undertake planned economic development under the Five-Year Plans.  But Public debt is bound to cause a burden to the economy and the people. It leads to additional doses of taxation. Also only a very small part of the total volume of debt is of perpetual nature, the remainder being managed or repaid as per the maturity. The debt is to be managed by following scientific and economic principles so that it causes the minimum possible burden and it creates the least economic disadvantage. This assumes importance as the debt repayment and management of debt have their own impact on the entire economy.

Before explaining various aspects of debt management let us know briefly about the composition of public debt.  The total volume of public debt comprises both of internal debt ad external debt.  While borrowing, undertaken from the governments and financial institutions from other nations is external debt, internal debt consists of various types of loans mobilized by the government within the national boundary.The components of loans and their relative share in the total internal debt vary from a country to country.