Thesis is “The analysis of external debt sustainability in the Republic of Croatia”. The purpose of this thesis is to determine and analyze the current situation regarding the external debt of the Republic of Croatia, and to make a projection of the current trends and sustainability of the external debt in the future period. The paper defines external debt and its basic characteristics, as well as the causes of foreign borrowing. The structure of external debt is explained, as well as the difference between public debt and external debt. The structure of external debt will be observed according to defined sectors of debtors and creditors. Indicators of foreign indebtedness will be defined and divided into debt status indicators and debt flow indicators. These indicators will be analyzed on the example of Croatia and compared with a number of countries based in Central and Southeastern Europe. Then follows the projection of foreign debt repayment according to domestic sectors, namely the general government sector, the central bank, other monetary financial institutions, other domestic sectors and direct investments. The final step is the scenario analysis of the external debt sustainability, where the dynamics of the share of external debt in the gross domestic product will be analyzed through different shock scenarios of key macroeconomic variables. These include the real GDP growth rate shock scenario, the interest rate shock scenario, the current account of the balance of payments shock scenario, the euro depreciation against the dollar scenario, and the combined shock scenario. Conducting such analysis is necessary in order to determine the impact of foreign borrowing on the growth and development of the economy. Due to excessive foreign borrowing, the state becomes over-indebted, which causes a decrease in the growth rate of the economy and reduces the possibility of timely repayment of the debt. However, if foreign borrowing is controlled, it can have a positive effect on the economy.