Why may government deliberately plan for an unbalanced budget?

Why may government deliberately plan for an unbalanced budget?

Reasons for deliberate surplus budget planning

• To reduce aggregate demand by withdrawing excess amount of money from circulation
• So that government uses surplus budget to improve on the balance of payment position for instance by promoting import substitution industries
• To accumulate reserves for future investment/needs
• To improve the confidence of the population in the government
• To prepare for disasters
• To improve cooperation with other countries through provision of aid.

Reasons for deliberate deficit budget planning

• To reduce the burden of taxation from people
• To increase the level of supply
• To increase the level of aggregate demand in case of deflation
• Encourage saving among the general public
• Stimulate a level of economic growth
• Making borrowing cheaper for projects
• Lifting economy from slump or depression