<p>Government can have savings while having deficit because we are just talking about savings not <em>net</em> savings.</p>
<p>For example, imagine that government has zero tax revenue <span class="math-container">$\\\$10$</span> spending and <span class="math-container">$\\\$10$</span> of public investment. In this case the government is running deficit of <span class="math-container">$\\\$20$</span> yet it is also saving through investment. Due to the deficit being larger than saving on <em>net</em> basis government still dis-saves but saving is not zero.</p>
<p>So it is completely possible to save and run a deficit at the same time.</p>

CC BY-SA 4.0
2020-07-22T11:37:56.787Z
@elemolotiv no net saving is tax revenue-government spending (T-G). In this case that would be $-\$10$.
1muflon1
CC BY-SA 4.0
2020-07-22T12:55:26.447Z
sorry I am trying to pull things together. From 
$Y=C+I+G+NX$ we can derive $(Y-C-T)+(T-G)=I+NX$. That includes $NetSavings=(T-G)$ but where does government investment go? - alternatively could you suggest a source with all the formulas? thanks!
elemolotiv
CC BY-SA 4.0
2020-07-22T13:07:53.027Z
@elemolotiv government investment is part of $I$ in some undergraduate textbooks $I=S$ but that’s simplification actually even better undergraduate textbooks will mention its $I=S+T-G$. See for example Blanchards et al macroeconomics an European perspective
1muflon1
CC BY-SA 4.0
2020-07-22T10:50:24.203Z
2020-07-22T12:51:44.843Z
2020-07-22T12:51:44.843Z
1muflon1
<p>I am reading an IMF paper about China's debt (<a href="https://www.imf.org/%7E/media/Files/Publications/WP/2018/wp18277.ashx" rel="nofollow noreferrer">link</a>) which says:</p>
<p><em>❝ Despite a large augmented fiscal deficit of 10 percent, fiscal savings remain higher than other countries, resulting from the biased composition of spending towards investment ❞</em></p>
<p>How can a government have deficit and at the same time have positive savings?</p>

<macroeconomics><government-debt><saving>
How can a government save, if it has deficit?
elemolotiv
# How can a government save, if it has deficit?

(Asked by: username_0 on 2020-07-22)

I am reading an IMF paper about China's debt ([link](https://www.imf.org/%7E/media/Files/Publications/WP/2018/wp18277.ashx)) which says:

*❝ Despite a large augmented fiscal deficit of 10 percent, fiscal savings remain higher than other countries, resulting from the biased composition of spending towards investment ❞*

How can a government have deficit and at the same time have positive savings?

**Tags:** macroeconomics, government-debt, saving


---

## 1 answers

### Answer by username_1 on 2020-07-22. Score: 4

Government can have savings while having deficit because we are just talking about savings not *net* savings.

For example, imagine that government has zero tax revenue $\\\$10$ spending and $\\\$10$ of public investment. In this case the government is running deficit of $\\\$20$ yet it is also saving through investment. Due to the deficit being larger than saving on *net* basis government still dis-saves but saving is not zero.

So it is completely possible to save and run a deficit at the same time.

> **Comments:**
> **username_1**: @username_0 no net saving is tax revenue-government spending (T-G). In this case that would be $-\$10$.  
> **username_0**: sorry I am trying to pull things together. From  $Y=C+I+G+NX$ we can derive $(Y-C-T)+(T-G)=I+NX$. That includes $NetSavings=(T-G)$ but where does government investment go? - alternatively could you suggest a source with all the formulas? thanks!  
> **username_1**: @username_0 government investment is part of $I$ in some undergraduate textbooks $I=S$ but that’s simplification actually even better undergraduate textbooks will mention its $I=S+T-G$. See for example Blanchards et al macroeconomics an European perspective  

---

