A fiscal deficit (or budget deficit) occurs when a government's total spending exceeds its total revenue (tax and non-tax income, excluding borrowing) in a given fiscal year. It's a key indicator of government finances.
Fiscal Deficit = Total Government Expenditure - Total Government Revenue (excluding borrowings). Governments typically finance deficits through two main channels: borrowing (domestic or foreign) and central bank financing (printing money).
Fiscal deficits aren't always bad. During recessions or emergencies, governments intentionally increase deficits to stimulate demand in the economy (fiscal stimulus). However, persistent high deficits can lead to growing government debt, inflation, and rising interest rates.
In Bangladesh, the fiscal deficit for FY2024-25 was approximately 5% of GDP. The government finances this gap through domestic banking and non-banking sector borrowing plus foreign aid.