A budget deficit occurs when an individual or organisation, such as a company or government, expects to spend more money than it receives in revenue. This includes all forms of income, such as taxes, tariffs, customs, or the sale of goods and services, as well as all forms of expenses, such as wages, payment for services, and repayment of previous debts.

When a company or government earns more than it spends, it has a budget surplus rather than a deficit.

A budget deficit occurs when a government's expenditures exceed its revenue within a specific period, typically a fiscal year. This shortfall results in borrowing to cover the gap, leading to increased national debt. Budget deficits often arise from economic downturns, increased spending on social programs, or tax cuts without corresponding reductions in spending. While deficits can stimulate economic growth through public investments, prolonged deficits may strain financial markets, trigger inflation, or necessitate austerity measures. Governments aim to manage deficits through fiscal policies, balancing spending with revenue to maintain economic stability and sustainable debt levels.