Public debt is divided into domestic and external. Domestic debt is formed primarily through the issuance of government securities in national currency, while external debt is formed through loans from international organizations, other states, and the placement of eurobonds on foreign markets.
The absolute value of debt alone says little, so it is compared to the size of the economy—calculated as a ratio to GDP. The structure is also assessed: the share of external debt, currency composition, and repayment schedule. Debt denominated in foreign currency is riskier than domestic debt, as weakening of the national currency automatically increases the burden on the budget.
For a private investor, the state of public debt is a factor affecting the yield of all instruments simultaneously. Deterioration in the debt position leads to higher required yields on government securities, and subsequently borrowing becomes more expensive for companies and interest rates on loans and deposits change.