As the government draws its income from much of the population, government debt is an indirect debt of the taxpayers. Government debt can be categorized as internal debt, owed to lenders within the country, and external debt, owed to foreign lenders. Governments usually borrow by issuing securities, government bonds and bills. Less creditworthy countries sometimes borrow directly from supranational institutions. Some consider all government liabilities, including future pension payments and payments for goods and services the government has contracted but not yet paid, as government debt.
Another common division of government debt is by duration until repayment is due. Short term debt is generally considered to be one year or less, long term is more than ten years. Medium term debt falls between these two boundaries.(c)Wiki
So the government borrowing can happen in two ways:by different kind of bonds and by government liabilities.
Why so many people suppose that huge government debt is a great problem for any country?
- Crowding out problem
- Default risks
- Hyperinflation
To cover the debt government may just decide to issue more money.If we assume that the real output does not change because of that(due to various reasons), the value of the currency will go down, therefore the prices will rise.
- Loss of the people confidence