Reasons for balanced budget

BALANCED BUDGET. MEANING AND REASONS FOR BALANCED BUDGETING. A balance budget of a government is a budget with revenue equal to expenditure. In other words, balance budget occurs when the total estimated revenue of a government equal to the proposed expenditure. Most economists have also agreed that interest rates, increase savings and investment, shrink trade deficits and finally help the economy grow faster over a longer period of time.

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Explain the concepts of budget surplus balanced budget and the component of national debt.

Explain the concept of and criteria for revenue allocation (including resource control) in Nigeria and associated problems

Reasons For Balanced Budgets

  1. Balance budget prevents gigantic debt burdens: Balanced budget is usually used by all government to prevent gigantic or painful debt burdens.
  2. It prevents financial insecurity: Balanced budget do prevent financial insecurity in the economy
  3. It helps to control expenditure: Balanced budget is used by government to control financial expenditure.
  4.  Reduction in interest payment on loans: Balanced budget equally helps to reduced interest on payment of loans.
  5. It helps to curb excessive borrowing: Balanced budget equally helps to prevent excessive borrowing by government.
  6. It aids or increases savings: Balanced budgets are generally known to increase savings by government.

  1. economic tools for nation building
  2. budgeting
  3. factors affecting the expansion of industries
  4. money market
  6. how companies raises funds for expansion


Causes of low capital formation in West African countries

The causes of low capital formation in West African countries include:

  1. Existence of a vicious circle of poverty: The existence of low income results in low savings and in turn results in a shortage of capital for investment, which results in low investment. Low investment leads to low, output, and eventually to low income. The low income result again to low savings and the vicious circle continues.
  2. Wasteful expenditure: Many governments in West African countries are involved in wasteful expenditure as they embark on prestigious but productive ventures thereby resulting low capital formation
  3. Inequitable distribution of income:In many West African countries, only individuals are rich while thepoor. Even the few rich ones spend their money on prestigious projects which are on-productive and these generally give rise to low capital formation.
  4. Higher propensity to consume: In many West African countries, the propensity to consume by the people is higher than the propensity to save. There is a high taste for imported goods, e.g. cars, television, rice and clothing materials. This high propensity to consume results in low savings and investment.

Low saving: Many working class people in West African do not have the habit of saving and are usually poor. This may be due to their low earnings, which may not be enough for them to spend not to talk of saving. This usually affects negatively capital formation can be solved when the above problems

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