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 Form 4 Business Studies online lessons on public finance

Classes of public or national debt

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Answer Text:
Classes of public (national debt)
i. Reproductive debt
This is borrowed money used to finance project(s) that can generate revenue. Such projects, once started may become self sustaining and may contribute towards servicing/repaying the debt. E.g. money used to finance
irrigation schemes, electricity production e.t.c.
i. Dead-weight debt
This is borrowed money that is used to finance activities that do not generate any revenue. Examples are money used to finance recurrent expenditure e.g. payment of salaries or for famine relief e.t.c
Dead-weight debt is a burden to members of the public since they are the ones who are expected to
contribute towards its repayment.


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