Public debt management is a very important research issue as the public debt management strategy affects the Latvian macroeconomic development and each inhabitant of the country. Public debt appears almost in every country in the world, but amount of debts, how debts influence national economy and how the government uses received funding – all this aspects influence the lenght of the government debt in the country. The study aim is to explore the development of public debt in perspective, with particular attention to the Latvian external debt and its consequences for the economy. The study examines the nature of the public debt, public debt creation reasons, public debt management techniques and strategies, the nature of the credit and its influencing factors, the main Latvian economic indicators during the period from 1995 to 2010, and the effects of public debt on the Latvian economy has been researched.