Question

If the Primary Deficit is zero, it means that:

Options

• The government has no borrowings at all

• The government is borrowing entirely for fresh spending

• Borrowing is only to pay interest on old loans

• Revenue receipts exceed revenue expenditure

Answer 1

A zero Primary Deficit means that the entire Fiscal Deficit is accounted for by interest payments on past debt. In other words, the government's current borrowing is only to pay interest on old loans, with no fresh borrowing for new spending.