Primary deficit refers to the difference between the fiscal deficit of the current year and the interest paid on the borrowings of the previous year.
The primary deficit is calculated as the fiscal deficit minus the interest payments that are pending on previous borrowings. This means that the primary deficit represents the amount of borrowing that the government requires to meet its expenses, without including interest payments.
A primary deficit occurs when the government’s borrowing is not sufficient to cover both its expenses and interest payments. In other words, the government must borrow more money to cover its expenses while leaving the interest payments unpaid.
When the primary deficit is zero, it means that the government has enough borrowing to cover its expenses and interest payments.
Primary deficit = Fiscal deficit – Interest payments
