To lead an effective economic policy, it is very important to pay attention to the policy of public debt. Public debt as an instrument of economic policy has a large influence on economic development. Public debt, is today a major economic problem. The growth of public debt is not only specific for Croatia but also for other states of the European Union. The theoretical part of this study explains the definition of public debt, and other basic terms related to public debt. The analytical section shows the movements of the public debt in the Republic of Croatia, and public debt in the European Community. The financial crisis had a large influence to the indebtedness of states of the European Union and Croatia. About the public debt has never been so often debated as in the current situation. According to the data we can see that Croatia have entered into the category of highly indebted countries, like many other EU member states. In order to improve the current economic situation, large macroeconomic reforms are required and also it is necessary to organize a good debt management system that will maximize the positive and minimize the negative effects of public debt on economic growth.