The time of creation of Croatian independence was also a time of a serious situation that affected the economic policy of the newly created state (payment of debt of the former country, rebuilding efforts for the destroyed areas, defence financing, care for displaced persons...). Unsafe market reduces the interest for investments, there is hardly any credit rating – it is basically impossible to get a loan. High unemployment rate slowed down the growth of Croatia’s economy, which resulted in a very high public debt for the new state in the 1990s. The subject of this work is public debt as an element of the fiscal and economic policy, with an emphasis on the Republic of Croatia. We try to explain how the public debt was accumulated, the current state of debt, which measures are necessary to reduce public debt in the future. The central idea of the entire work is how seriously can public debt prevent a country’s development. The causes of the poor state of the Republic of Croatia in all sectors can be found in the fact of long-term financing of the state through foreign loans, especially since the last financial crisis. The current level of public debt has become alarming and this has encouraged the economic policy decision makers to seek possible solutions which would stop the unfavourable trends, since the reduction of public debt is one of the preconditions for economic growth.