How do the Government, Firms and the Foreign sector pay their debts in this circular flow of income?
For the households it would through the savings arrow. Borrowing from macroeconomic perspective can be and in most advanced textbooks (such as Romers advanced macroeconomics) is often treated as a negative saving.

Hence when the households and businesses borrow they incur negative saving and when they repay debts it can be viewed as a positive increase in saving (which for people who borrowed would be negative).

This can actually be clearly seen from the diagram since savings arrow goes to the financial market and from financial market you get the borrowing.

It’s not that the financial markets lend people money - people lend money to each other through financial markets and then pay it back from the savings. 

Saving is the difference between your income and consumption so in order to pay any debt you have to save (if you consume all your income you cannot pay your debts). 

When it comes to the government it technically pays back by public savings which occurs when taxes are larger than spending so there in principle you could argue there should be another savings arrow from the government. However, I think that Krugman decided to include this in the transfer arrow. If you buy a government bond and your government is paying you back interest you could consider it as transfer.