General government fiscal and structural balance

The fiscal balance is the difference between government revenues and spending. This balance could be negative, resulting in a deficit, or positive, resulting in a surplus. Consecutive large fiscal deficits are strongly detrimental to the sustainability of public finances. When the level of outstanding debt is high, the cost of servicing that debt (interest payments) can push a country further into deficit, thereby hindering fiscal sustainability. Conversely, improvements in the fiscal balance over time signal good fiscal health. Improvements result from a combination of the following factors: political commitment to fiscal discipline, sound institutional arrangements for budgeting and/or favourable performance of the economy.