Government Borrowing

Government borrowing occurs when a government needs funds to cover expenses like infrastructure, public services, or economic stimulus, and the revenue from taxes is insufficient. To do this, it borrows money by issuing securities such as bonds, which investors buy with the promise of repayment with interest later. This borrowing helps the government manage short-term gaps between revenue and expenditure, but excessive borrowing can lead to higher future debt obligations and interest costs. Essentially, it’s a way for governments to finance important projects or stabilize the economy when current funds are limited.