Financial deficit

The financial deficit occurs when the financing need of a country is greater than its financial resources. That is, the existing resources in the economy are not enough to achieve higher levels of profitability.

It is a macroeconomic modality of deficit that appears when comparing levels of savings in current account of a state with its capital deficit, resulting in a negative difference. In other words, this last magnitude is greater than the first.

When a country actively participates or is forced to intervene in some way in the life of its economy, there may be a lack of financial resources to the point that it even prevents its action. This fact is normally reflected in the emergence of other types of deficits in response to the magnitude or nature of the financing problem.

The use of the financial deficit basically focuses on knowing how much any government will have to borrow to cover its excess expenditure in relation to its income when carrying out its work.

The opposite is the financial surplus .

Importance of the financial deficit in the public sector

The management of existing financial resources in a country by its political and economic leaders must be aimed at making them useful when it comes to achieving certain levels of profitability (usually through investments).

A financial deficit would indicate that undertaking such investment actions given the resources available to the country would yield negative results and the emergence of other types of public deficits. On the contrary, in cases where more positive results are estimated and the possible creation of profit we would be talking about financial surpluses .

Financial deficit in the private sector

Just as countries have resources to carry out investments, companies develop their economic activity taking into account resources and budgets with which to face new production or investment routes.

by Abdullah Sam
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