Public Debt and Economic Growth: Does the Composition of Government Borrowing Matter More Than Its Size?

Public debt is often discussed as if its size alone determines whether it helps or harms an economy. This article argues that the purpose, productivity and financing conditions of borrowing are equally important. Debt used for well-selected infrastructure, education, health and research can raise productivity and future tax revenues; borrowing that mainly supports recurring expenditure without lasting economic benefits can leave future taxpayers with repayment obligations but few new resources. However, even productive projects can become harmful when they are poorly planned, overpriced, delayed or financed at unsustainable interest rates. Drawing on international research and proposing a country-panel research design, the article explains the channels linking debt, public investment and real GDP per capita growth. It concludes that governments should assess both debt sustainability and the quality of spending, rather than rely on a single debt-to-GDP threshold.