Financial deficit Essay Example | Topics and Well Written Essays - 750 words

Financial deficit - Essay Example In the year 1886, British North America debt charges were amount to 28.9 percent of total government expenditures. Economic growth trends have the potential to influence financial deficits of government budget. Since taxes are one of the major sources of income of the government, increase in tax collection increases government revenues that further help to reduce the fiscal deficit for a financial year. Conversely, at times of economic downturns the government expenditures are found to increase considerably. Financial deficit is a condition when the total expenditures of an entity exceed the revenue generated by it, but excluding any external borrowings. The financial deficit of a government of any country is generally called ‘fiscal deficit’. A government has to prepare a budget which proposes expected revenues and spending for a financial year. If the budget estimates that the overall revenues to exceed overall expenditure for the given financial year, then such budget will have surplus or positive balance which is then termed as budget surplus. On the other hand, when the overall government spending exceed total revenues for given financial year the budget has negative balance and it is called fiscal deficit. The budget surplus is generally invested elsewhere like the government bonds and treasury bills of another country, etc. whereas a budget deficit has to be financed using external borrowings in order to balance the budget. In the past, government debt had incurred almost exclusively for some of great public works such as harbours, canals, ship channels, railways, roads for transport, and so on. In the year 1886, British North America debt charges were amount to 28.9 percent of total government expenditures. During the Rothschild dynasty in the late 18th century, the deficit could only be financed by taking loans