Fiscal Balance
Fiscal balance represents the difference between government revenues and expenditures over a specific period.
Meaning in Practice
A fiscal surplus occurs when revenues exceed expenditures, while a deficit arises when spending is higher than revenue. The fiscal balance is usually reported annually or quarterly. It reflects the government’s budgetary position.
Why It Matters
Persistent deficits can increase public debt and influence borrowing costs. Surpluses may reduce debt levels and strengthen fiscal sustainability. Investors monitor fiscal balance to assess sovereign risk.
Market Impact
Widening deficits can lead to higher government bond yields due to increased issuance. Strong fiscal positions may support currency stability and investor confidence. Credit ratings can be influenced by fiscal trends.
Example
If a government collects 500 billion in revenue and spends 550 billion, it records a fiscal deficit of 50 billion.