Budgetary Deficit

Budgetary Deficit is defined as the difference between the receipts and expenses of the government’s capital account and its revenue.

The revenue expenses of the government may exceed the revenue receipts. This causes the revenue account deficit. Relatively, the capital subsequent expenses exceed their receipts and it results in the capital account deficit. The sum of both revenue account deficit and capital account deficit create the budgetary deficit. It is commonly expressed as the GDP (Gross Domestic Product) percentage.

The Budgetary Deficit is usually counted within one fiscal year.

Avoid Budgetary Deficit

Budgetary Deficit reflects the current financial state of the country. In order to avoid the budgetary deficit, the government should adjust their expenditures accordingly. The deficit in spending may be also caused by tax rate reduction and economic growth/downturn periods.

The Budgetary deficit is a complex notion which must be viewed from five different concepts: revenue deficit, capital deficit, fiscal deficit, primary deficit, and monetized deficit.

There are certain strategies that the government can utilize in order to avoid the Budget Deficit:

  • Reduce the government spending
  • Increase taxes
  • Lower corporate taxes thus increasing inflows from taxes
  • Print additional currency to cover debt payments

These and other measures should be taken carefully as an inconsiderate implementation of them can lead to hyperinflation.