In this paper we will analyse fiscal policy and its stabilizing role in a country, the fiscal system and fiscal convergence of the European Union, as well as the determination of the state budget, budget deficit and public debt of the Republic of Croatia. In addition to the explanation of the budget deficit and public debt of the Republic of Croatia, their trends in the period from 2018 to 2021 will be given, and a comparison to the other countries of the European Union. In 2021, the public debt and budget deficit as a share of the GDP of the Republic of Croatia were below the European average, and all EU members recorded a budget deficit with the exception of Denmark and Luxembourg. Fiscal policy and its methods, as well as fiscal techniques can be seen as a basis for the successful functioning of the fiscal system and economy as a whole. Its important role is to perform a stabilization function both on the microeconomic and macroeconomic level. It is important to know how to distinguish the public debt from the budget deficit, because the budget deficit refers to a greater outflow of expenditures compared to revenues during the year, and public debt is viewed as the total sum of previous budget deficits. The goal of this paper is to explain in more detail the role of fiscal policy as a component of economic policy, public debt as an instrument of economic policy and the budget deficit related to it, and their interaction in order to achieve the goals of economic policy.