Fiscal Surplus

A fiscal surplus is the opposite of a budget deficit. It allows a government to repay debt, build up savings or reduce future borrowing needs.

For example, if a government collects 900 billion in revenue and spends 870 billion, it has a fiscal surplus of 30 billion.

Surpluses are less common than deficits in most developed economies. They may arise during strong economic growth, when tax revenues rise and spending on unemployment benefits falls, or from deliberate policies of spending restraint or higher taxes. Some countries rich in natural resources run surpluses and save them in sovereign wealth funds.

Economists generally view surpluses as appropriate in good times, building a cushion for downturns. Running large surpluses during weak economic periods can, however, reduce demand and slow growth. Some analysts distinguish the primary balance, which excludes interest payments on debt, from the overall balance.