When we talk about the finances of a person, company or country, there are three possible situations in terms of their economic resources, whether they are money or any other good.
When the difference between income and expenses is positive and there is a surplus, it is called a surplus. On the contrary, if expenses exceed income, this difference is called a deficit. If income is equal to expenses, there is a balanced situation.
At the macroeconomic level, the deficit or surplus is usually associated with the balance of the trade balance or public spending. In the first case, we speak of a trade deficit when a country’s exports are less than its imports, and a surplus if the opposite occurs.
In the case of public spending, we speak of a surplus, deficit or fiscal balance. Governments obtain their income through the taxes they collect from citizens and from the income of state-owned companies, such as Pemex, in the case of Mexico. If these revenues are not enough to cover their expenses and the government is in a deficit situation, governments resort to debt through loans from international organizations or e, which is like borrowing from the private sector.
If the financial situation of the government takes into account the payment of interest on the debt, we speak of a primary deficit or surplus. There is talk of a primary surplus if a government’s revenues are greater than its expenses without having yet paid interest on its debt. Therefore, a government can have a primary surplus during a certain period, and at the same time have a fiscal deficit if the expense that these interests represent is taken into account.
Facebook Comments
Disqus