This book delves into the complex interplay between traditional debt financing and Islamic financial principles. In contemporary fiscal landscapes, many developing countries face challenges with debt financing, including the burden of interest and the risk of default. The book explores these issues comprehensively, analyzing how debt financing can often contradict Islamic economic principles and create socio-economic imbalances. It then pivots to present alternative solutions rooted in Islamic fiscal policy and blended finance mechanisms. Islamic fiscal policies emphasize equitable wealth distribution, zakat (charitable giving), and fiscal responsibility, while Islamic blended finance combines philanthropic funds with private investments to support sustainable development projects. By integrating theoretical analysis with practical case studies, this book provides valuable insights into how Islamic finance can offer viable, ethical alternatives to conventional debt financing. It aims to contribute to the broader discourse on sustainable development, financial inclusion, and economic justice.