From the latin debĭta, debt is the requirement that the subject must repay, render or pay, especially money. Public, on the other hand, is an adjective that relates to what belongs to society as a whole or which is common to a city.
The notion of public debt means all debts that the State maintains with another country or individuals. It is a mechanism to obtain funding through the issue of securities.
The State, therefore, incurs public debt to resolve its liquidity problems (when the cash is not sufficient to meet immediate payments) or to finance medium and long term projects.
Public debt may be contracted by the municipal, provincial or national administration. By issuing shares and securities and placing them on domestic and foreign markets, the State promises a future paid with interests on the basis of the arrangements laid down in the obligation.
The issuance of public debt, like the creation of currency and taxes, are the means available the State to fund its activities. Public debt, however, can also be used as an instrument of economic policy, according to the strategy chosen by the authorities.
It is possible to classify the public debt in many different ways. Real public debt is that which is composed of titles that can be purchased/acquired by individuals, private banks and the foreign sector. Fictitious debt, however, is the issue for the Central Bank of the country, which is an agency of the same public administration.