Problem

Government budget deficits

Other Names:
National public sector deficits
Unsustainable 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.

Related UN Sustainable Development Goals:
GOAL 8: Decent Work and Economic GrowthGOAL 11: Sustainable Cities and CommunitiesGOAL 12: Responsible Consumption and ProductionGOAL 17: Partnerships to achieve the Goal
Problem Type:
D: Detailed problems
Date of last update
03.08.2021 – 17:45 CEST