Problem
Government budget deficits
Other Names:
National public sector deficitsUnsustainable national fiscal policies
Unbalanced national budgets
Government deficit spending
Imprudent national budgets
Government overspending
Imbalance of government revenue mobilization and expenditure allocation
National current account deficit
Nature:
The excess of government spending over revenues generated from taxes, import duties and the like. It is sometimes divided into "above the line" (recurrent spending including interest on debt) and "below the line" (capital projects, investment, debt principal repayment). The former is analogous to the "profit and loss" account of an enterprise, whereas the latter is analogous to its "investment sources and uses", with the combined account being equivalent to the "cash flow" account. A country's current account deficit is therefore the gap between its domestic savings and investment. A budget deficit is a form of dis-saving. Large budget deficits generate inflationary pressures.
Incidence:
Deficits can be more easily absorbed by countries with high rates of domestic private savings and well-developed capital markets. Thus a relatively high deficit need not cause problems in an efficient high-saving economy, whereas in a low-saving, highly distorted one, even a small deficit might be destabilizing.
Broader Problems:
Sectoral imbalancesImbalance of payments Aggravates:
Speculative flight of capitalExternal debtDecline in government expenditureFinancial instability of national economiesOver-reliance of government on money creation Reduced By:
Capital gains taxStrategies:
Developing sustainable economic systemsEnsuring national economic policies support sustainable developmentSpending government incomeAchieving sustainable national fiscal policiesReducing unsustainability of macroeconomic policiesReducing public borrowingBalancing national budgetBorrowing by governmentUnbalancing government revenue and expenditureIncreasing efficiency of public spending Organizations:
Institute of International Finance (IIF)International Institute of Public Finance (IIPF)Global Research Alliance for Sustainable Finance and Investment (The Alliance)International Trade and Finance Association (IT and FA)Multinational Finance Society (MFS)African Accounting and Finance Association (AAFA)Asia-Pacific Structured Finance Association (APSA)Asian Bureau of Finance and Economic Research (ABFER)Asian Finance AssociationAssociation of African Development Finance Institutions (AADFI)Conseil Régional de Formation des Institutions Supérieures de Contrôle des Finances Publiques de l'Afrique Francophone Subsaharienne (CREFIAF)BETTER FINANCE (BF)European Economics and Finance Society (EEFS)International Project Finance Association (IPFA)SUERF - The European Money and Finance ForumCouncil of Arab Ministers of FinanceGlobal Clearinghouse for Development Finance Subject(s):
Commerce → CreditCommerce → Finance
Commerce → Taxation
Development → Sustainable development
Government → Government
Government → Public
Policy-making → Policy
Societal Problems → Imbalances
Related UN Sustainable Development Goals:
Problem Type:
D: Detailed problems Date of last update
03.08.2021 – 17:45 CEST