What is the difference between public debt and external debt?

External debt is an amount of money owed to foreign countries or governments. If a country borrows money from another country, this will be considered external debt.

Public debt is an amount of money usually owed to citizens and institutions who lent the government money by buying governmental bonds, for example.

A country’s external debt will usually be in foreign currency, whereas the public debt will be in the country’s own currency. Countries can thus print more money to repay public debt.

An internal debt can be dealt with by a government by printing money because it will have to repay it in local currency. External debt usually represents a bigger problem, as it usually has to be repaid in a foreign currency. (See What happens when a country has too much debt?)

Some governments allow foreigners and foreign institutions to buy their government bonds in local currency. In such a case, some of the public debt will be owed to those foreigners.

The debt alone can’t tell whether a country is doing well or bad. If the economy is going well, the debt to GDP ratio might not be a problem even if it is relatively high. On the other hand, bad economy in addition to a high debt constitute a serious problem. (See Why do countries devalue their currency?)