This study is based on the following hypothesis: " It is possible to solve the public debt problem in the Islamic environment"

A framework for the analysis was set, where a model for budget deficit and public debt was used. In that model the main reasons for public debt problem are: (1) Governments are spending more than the ability of their economies to raise public revenues , (2) average interest rates for the debtor countries have been greater than the rate of increase in the Gross Domestic Product. Above reasons have created many problems such as inflation, higher interest rates, crowding out private investment, and the increase of economic dependence of the debtor countries.

Three different approaches were explained for solving the problem:

1 - The IMF and IB approach: Where fiscal and monetary policies in the debtor countries must be used eliminate the excess demand in the economy through increasing taxes reducing subsidies, and using average cost pricing for public utilities.

2 - The Debtor Countries Approach: Where creditor countries should bear some responsibility because of their economic policies. They should try to eliminate a part of their debt and rescheduling the remaining part, and to open their markets for the products of debtor countries.

3 - The Islamic Approach: To activate principles and rules of Islam in the economic field, in particular finance such as profit and loss sharing, output and sales and interest free loans based financing instruments.

The study ends with a confirmation of the hypothesis and suggesting the importance of activating of the Islamic rules in the economies of the Islamic countries. Especial interest was given to the Islamic integration.