Deficit Budget
- The government may opt for a deficit budget due to the following:-
- A deficit budget is necessary to remove an economy out of a recession or depression.
- It may be deliberate effort by the government to stimulate the level of economic activities in an economy.
- A deficit budget is necessary to increase peoples' purchasing power.
- At times deficit budgets are used to win political support through reduction in tax levels.
- Deficit budgets are necessary to ensure a fair distribution of income to the people.
- A deficit budget is necessary to maintain a high level of employment in an economy.
- A deficit budget may permit the government to undertake some big development projects which can't be financed by taxation above
- A deficit budget if financed from external sources may act as away of raising foreign capital.
- A deficit budget is necessary to reduce the tax burden since funds are borrowed.
- A deficit budget is necessary to protect infant industries from foreign competition by offering them subsidies.