ABSTRACT
This chapter concerns another form of financing public policies and programmes, namely the borrowing of money. Different from other forms of public sector revenue that have been discussed so far, borrowing presents some peculiar features. Government borrowing results in an increase of public debts, which poses the issue of fiscal sustainability. Fiscal sustainability refers to the capacity of the government to pay their obligations, including interest and principal on government bonds. Many countries in the world have established systems of rules and regulations for ensuring fiscal sustainability, or at least to signal to investors that they are committed to ensure that public debts are sustainable. The issue of fiscal sustainability has become increasingly important in the last decade, especially when the public debt of many countries increased in relation to efforts from governments to stimulate the economy after the 2007-2008 financial crisis and to salvage parts of the banking sector.
