What Is a Budget Surplus

Budget surplus means income exceeds expenditure. At individual level, this term is simply known as savings. Term savings is called budget surplus in broader aspect of industries, business or government. If any organization or government is showing surplus in its results, it is an indicator of good health of the entity. This extra money is invested in the development of the business or in welfare schemes in case of money being saved by the government.

Budget surplus is the opposite of budget deficit. Most recent example of budget surplus is demonstrated by the city of Springfield where fiscal year ending on Feb ’29 is projected to be ending into surplus of $839,000. This surplus will be used in paying increments in contractual employments as suggested by the city mayor, Frank Edwards. US booked budget surplus during 1990s during the Clinton tenure. However since 1950, US have been able to book budget surplus only for few years.

Budget surplus, when achieved by the government, is an indicator of very strong economy. At the time of budget deficit, budget surplus lowers net public debt resulting into indirect influence on tax payers. Revenue generated by the government exceeds expenditure incurred, thus providing surplus to the government to invest this surplus in betterment of people’s lives.

Economists are at ease in the situation of budget surplus. They are left with fewer worries about increase in public debt which is a determinant in inflation. It helps to take decision about slowing or fastening of economic growth. As opposed to budget deficit where finances are diverted towards clearing debts, budget surplus provides opportunity to divert funds towards productive purposes. However, it is not essential for any government to achieve budget surplus.

Government of any country intends to use budget surplus in ensuring quality life of its citizens. Payment of bonuses to pensioners, or development of an abandoned park for children’s play, are some of the simple and visible example of investing budget surplus in the development of any country. Tax structure also shows some positive changes when revenue generated exceeds expenditure. This provides a kind of relief to the taxpayers. Increase in GDP is a direct effect of budget surplus resulting into the increase in the pocket power of the citizens.

Budget surplus in business indicates healthy state of the enterprise. This is the result of efficient management, cost control and efficient expenditure checks. Any extra penny is a boon to the project and availability of resources can be engaged in expansion plans or diversification activities. Announcing dividends and bonuses to investors is a common activity arising due to the surplus available.

Sweden, Brazil, Kuwait are some of the countries that have been able to boast budget surplus in 2011. This clearly explains the strength of the currencies of these countries. Booking budget surplus year by year defines the characteristics of rich nations.