What Is Fiscal Debt?

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Debt can mess up the credit rating of a country as well as a person.
Debt can mess up the credit rating of a country as well as a person. (Image: debt defined image by Christopher Walker from Fotolia.com)

Fiscal debt, as opposed to ordinary debt, is a phrase normally associated with a government's fiscal balance. Fiscal debt and fiscal deficit are related and sometimes used interchangeably when discussing the financial standing of a government.

Basics

According to Investopedia.com, fiscal debt is the accumulation of a government's fiscal deficits over time. The fiscal debt is the total amount a government owes to creditors.

Misconceptions

Debt and deficit are not the same even though many people use the terms interchangeably. A fiscal deficit occurs when a government's expenditures are more than the revenue generated. This occurrence is typically limited to time frames, such as a quarterly fiscal deficit or a yearly fiscal deficit. Fiscal debt is all the debt regardless of time frame.

Opinions

While long-lasting fiscal debt may have a negative effect on economic factors such as inflation and the value of the dollar, some economists believe that a fiscal deficit can help bring a country out of a recession. This was the belief of the late John Maynard Keynes.

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