# How can a government save, if it has deficit?

I am reading an IMF paper about China's debt (link) which says:

❝ Despite a large augmented fiscal deficit of 10 percent, fiscal savings remain higher than other countries, resulting from the biased composition of spending towards investment ❞

How can a government have deficit and at the same time have positive savings?

## 1 Answer

Government can have savings while having deficit because we are just talking about savings not net savings.

For example, imagine that government has zero tax revenue $$\\\10$$ spending and $$\\\10$$ of public investment. In this case the government is running deficit of $$\\\20$$ yet it is also saving through investment. Due to the deficit being larger than saving on net basis government still dis-saves but saving is not zero.

So it is completely possible to save and run a deficit at the same time.

• @elemolotiv no net saving is tax revenue-government spending (T-G). In this case that would be $-\$10$. – 1muflon1 Commented Jul 22, 2020 at 11:37 • sorry I am trying to pull things together. From$Y=C+I+G+NX$we can derive$(Y-C-T)+(T-G)=I+NX$. That includes$NetSavings=(T-G)$but where does government investment go? - alternatively could you suggest a source with all the formulas? thanks! Commented Jul 22, 2020 at 12:55 • @elemolotiv government investment is part of$I$in some undergraduate textbooks$I=S$but that’s simplification actually even better undergraduate textbooks will mention its$I=S+T-G\$. See for example Blanchards et al macroeconomics an European perspective
– 1muflon1
Commented Jul 22, 2020 at 13:07