Budget surplus and budget deficit, State budget and economic policy, Summary - International finance

Budget surplus and budget deficit

The total amount of income in the ideal case should cover the planned expenditure items of the budget. When expenses exceed the revenue part of the overall structure, an budget deficit is formed.

The government can use the rest of the revenues for non-program or plan expenditures, make long-term payments on public debt, or transfer this balance to the budget of the next period (year).

The budget deficit for established international standards should not exceed 5% of GDP. It is covered by internal and external state loans in the form of sales of government securities, loans from extrabudgetary funds (insurance fund or unemployment insurance fund, pension fund).

But this is not the only way to cover the budget deficit. During economic shocks, governments often resort to issuing money to cover the budget deficit

The consequences of such emissions turn into uncontrolled inflation.

According to the Maastricht Treaty, the EU member state must keep the budget deficit not exceeding 3% of its GDP. But at present, most of the countries, including the most economically powerful country, the FRG, do not correspond to this basic criterion. The problem is that the long recession, in which European countries have turned, has stalled business activity, and unemployment has stably kept at a level exceeding 10%, and consequently, the tax source of budget revenues from the middle class has significantly decreased. Large businessmen and banks, referring to their difficulties, receiving from the state huge preferential loans and other forms of assistance, do their best not only to increase taxes, but also to pay in full the taxes they are required to pay. This creates intractable contradictions for the European economy. Therefore, it is understandable that the intensity of political passions is high in those countries that face the greatest financial and economic problems, and their population - with growing difficulties. This is primarily Greece, Spain, Portugal, Hungary, Latvia, Ireland, Romania; the situation in France, Great Britain and even in the largest economically country is far from successful - the FRG, which remains the only "motor" for the whole EU.

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The expenditure part of the budget as a whole characterizes the main goals of budget allocations for the development of the national economy and culture of the country. They always have a clear target character and irrevocable principle. Irreversible provision of public funds from the budget for targeted development is called budgetary financing. This mode of spending financial resources differs from bank lending, which, as a rule, assumes a returnable nature of the loan. Irrevocability of the provision of financial resources does not mean arbitrariness in their use. In such cases, a special procedure and conditions for using resources for the targeted direction and ensuring overall economic growth and improving the life of the population are developed.

State Budget and Economic Policy

The state budget of the country is far from only and not so much & quot; technical plan & quot; income and expenditure, and the main financial annual law, which reflects the essence of the state's economic policy, its theoretical and methodological basis. In recent decades, the alpha and omega of the state budget policy of almost all the countries of the world (except for the fast-growing economies not affected by the global crisis, as well as the Scandinavian countries) has become the government's orientation to low inflation at any cost, including through credit restraint through high credit interest of the central bank. In accordance with the monetary approach, it was believed that precisely this policy ensures high growth with a minimum of inflation. Indeed, the United States, Japan and the EU countries managed to cope with inflation (which was a nightmare from the second half of the 1970s), but failed to ensure high economic growth rates, which is noted by many of the most authoritative economists.

Moreover, the emphasis on purely monetary policy, while the more fundamental element of financial and economic policy was clearly underestimated - fiscal policy, in many ways and formed modern, intractable contradictions. The difference between these two components of financial and economic policy is that an active fiscal policy requires intensive and direct government regulation of economic processes and financial markets (Keynesian income). While the monetary policy does not require and sharply narrows the scope of such intervention, limited to manipulating the central bank's interest rate and introducing other indirect indicators (monetary approach).

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Both the global crisis and the ongoing Great Recession have shown the inadequacy of the monetary approach, its weak influence on the positive development of the economy and forced the US and European authorities to make greater use of the possibilities of fiscal regulation in the synthesis of monetary instruments. But the problem is that over the past three decades of the monetary school's dominance, its ideas and practical designs have been so firmly embedded in the minds of representatives of the business and political elites of many countries, and from the standpoint of the specific interests of dominant forces (business and political), which makes the transition to a qualitatively different system of regulation with a high level of state intervention. This, however, is inevitable in the near future. But today, the notion of a kind of almost divine hand of the market is still widely spread, which supposedly automatically solves all the problems and contradictions of the economy on the basis of self-regulation. Interesting in this connection is the thought of Professor Joseph Stiglitz, who stressed: "At a very high level of analysis there is an understanding that the markets themselves are not necessarily effective and stable. Before the crisis, many economists considered them as such. ".

Obviously, at this "very high level", including in the leadership of the IMF (which rigidly and consistently demanded a monetary policy for three decades in a row), today there is such an understanding of market limitations. IMF Chief Economist Olivier Blanchard said at the conference at the IMF headquarters in Washington: "The crisis has clearly indicated the limits of both market and government intervention. It's time to take stock and extract the first series of lessons. " As for the first part of the phrase - regarding the detected "market limits" - this is the truth. But the second part of the phrase remains unclear, in which O. Blanchard also speaks about the "limit of state intervention". I would like to raise the question of which countries he has in mind, where did this very "limit of intervention" come from? " If it is a question of China (or India), just the powerful state regulation of economy and the finance has saved these countries from crisis. It seems that the IMF still "is not ripe" before Stiglitz's "high-level analysis" problems.

Summary

• The balance of payments and its indicators (sources of money, exports of goods and services, capital inflows, imports of goods and services, and capital outflows, etc.) make it possible to really present the dynamics of the economic state of the country, both in annual and in a shorter time interval (month), to estimate in volume and cost indicators the growth of any sector of the national economy and, accordingly, to use the results of continuous analysis in the economic policy of the state.

• The foreign trade balance has a major impact on the overall balance of payments, as it directly plays a key role in creating a balance sheet for current transactions. Accumulation of the amount of negative balance from year to year forms the country's external debt. This is typical for groups of developing and transforming countries (subject of special analysis in the book).

• The balance of payments is a universal accounting tool in the field of financial and economic activity of the modern state, which allows objectively to assess the main parameters of its general state in a particular year, which makes it possible to carry out calculations for the performance of certain socio-economic, production, technical tasks and to ensure the functioning of the state as such (in its main functions).

• Simultaneously, this accounting tool allows you to quantify the country's connections and interrelationships in the system of the world economy and the world market, the nature (quality) of these relationships and relationships. This is especially important in forecasting the development of the country and its foreign economic relations, as well as in the long-term analysis of world economic development both in general and in certain areas (world trade, growth of foreign direct investment, world finance, etc.)

• The balance of payments is the most important tool for linking the national economy with the world economy, hence the relevance of understanding how this is implemented in practice. The country's balance of payments provides reliable information about the results of external transactions and transactions over a certain period of time. He is most closely associated with national and international currencies and is the most "sensitive" element of the state financial policy. In the comparative analysis, the "Current account balance" different countries, allowing to determine the overall financial state of a country or group of countries.

• We note that a high and constantly growing trade balance deficit poses a serious threat to the economy of any country. Therefore, one of the most important goals of the domestic and foreign economic policy of the state is to ensure that the balance of payments is reduced to a surplus. This principle is important in the activities of any company. Its violation, sooner or later, leads the country to catastrophic consequences, which is reflected in imbalances - the foreign trade deficit, the balance of payments deficit, and this leads to an increase in public debt on a large scale. Many countries are now faced with this problem.

• The state budget of the country is the main financial document receiving the form of the law. It reflects revenues and planned expenditures in all areas of government activity for the planned year.

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