The budget deficit and its financing methods

Government of each State faced with a situation where there is a budget deficit.It represents a balance of payments position of the country as part of the expenditure is much higher than the revenue, that is, formed deficit.The budget deficit - it is a disadvantage, the occurrence of which the state tries to avoid by all means possible.

However, alignment methods, and the balance may adversely affect the country's economy.For example, in groundless increase in emissions is imminent growth rate of inflation, which could then lead to a depreciation of the national currency, and thus to the economic crisis.And the deficit financing by the central bank increases the public debt, which he can not return.

To understand how to restore the balance of payments and to eliminate the budget deficit, it is necessary to identify the main reasons for its occurrence.Often, the negative balance is the result of irrational expenditure during the reporting period.Basically, the government allocates large sums to the development of economy, the implementation of major programs of social and national character, to develop measures to protect in the event of adverse situations in the form of earthquakes, wars and other things.One of the reasons is considered to be holding low-quality financial policy, reduction of the tax base, the development of shady business.In recent years, the budget deficit arose because of the crisis, the presence of large debts of the state to other countries.

In drawing up the plan for the coming period balance define the maximum amount of deficit that may arise under the influence of circumstances this year.Of course, these are not always correspond to the actual data, however, the government has taken various measures to prevent adverse effects.

budget deficit and its financing methods

As noted above, the issue of unsecured lending, and to equalize the balance of payments.However, these methods are not considered to be effective, as in the next reporting period, the deficit could rise even more.A good tool for regulating recognized the scope of taxation.With the changes in tax rates in certain groups can significantly increase contributions to the coffers of the country.I would like to note that this tool is only effective with the introduction of short-term changes, because in the future the natural reaction to this situation is the development of the black market or a significant reduction in industrial activity of individual industries.

Often, the budget deficit is reduced by a procedure such as sequestration.It assumes a steady decline of expenditure in proportion to revenues.Some articles are not subject to sequestration, in particular, the debt in foreign trade activities, as this would be seen as a default.It is not recommended to use this procedure in the social sphere, because it can cause the growth of social tension.

There was widespread method of issuing government securities, whereby the government borrows from the population of free funds.Internal borrowing is rather popular, as investors have more confidence in a reliable valuable documents of the state, rather than risky private entrepreneurs.In some cases, the government takes a decision on the sale of the precious metals, or even individual plots.