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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?

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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.

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    $\begingroup$ @elemolotiv no net saving is tax revenue-government spending (T-G). In this case that would be $-\$10$. $\endgroup$ – 1muflon1 Jul 22 at 11:37
  • $\begingroup$ 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! $\endgroup$ – elemolotiv Jul 22 at 12:55
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    $\begingroup$ @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 $\endgroup$ – 1muflon1 Jul 22 at 13:07

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