Public Saving

Published Jan 14, 2023

Definition of Public Saving

Public saving is defined as the difference between the government’s total revenue and its total expenditure. That means it is the amount of money the government has left over after it has paid for all its expenses. It is also known as the government’s budget surplus.

Example

To illustrate this, let’s look at an imaginary government budget. According to this budget, the government’s total revenue is USD 1 trillion, and its total expenditure is USD 900 billion. That means it has a budget surplus of  USD 100 billion. This USD 100 billion is also referred to as public saving.

Why Public Saving Matters

Public saving is an important indicator of a government’s fiscal health. It is a measure of the government’s ability to pay for its expenses without having to borrow money. Positive public savings indicate that the government is able to finance its activities without having to rely on debt. On the other hand, negative public savings indicate that the government is running a budget deficit and is having to borrow money to finance its activities. Thus, public saving should be closely monitored.