What is a primary balance used for?

Answer 1

A primary balance measures a government's fiscal position by comparing its revenues to its non-interest expenditures. It indicates whether a government is generating enough income to cover its spending, excluding interest payments on its debt. A positive primary balance suggests that a government can potentially reduce its debt, while a negative balance indicates the need for borrowing to finance its activities. This metric is crucial for assessing fiscal sustainability and guiding economic policy decisions.