- The budget deficit widened from US$88 billion to US$227.8 billion
- This was a 157% increase
- Outlays surged by 17.5%
Harare- The US government budget deficit widened by 157% to US$227.8 billion in June 2023, up from a US$ 88.8 billion gap in the same month of the previous year. This figure fell below market expectations of a US$175 billion deficit, as revenues continued to weaken and July benefit payments were accelerated into June.
Revenues decreased by 9.2% to US$418 billion, due to lower non-withheld individual income taxes.
Outlays surged 17.5% to US$646 billion, led by higher individual tax refunds, as the Internal Revenue Service cleared a backlog of unprocessed receipts.
Looking at the first nine months of the fiscal year, the budget deficit stood at US$1.393 trillion, compared to a US$1.375 billion deficit a year earlier. This is a significant increase and highlights the ongoing challenges faced by the US government in balancing its books largely attributed to the Ukraine war.
The US-China trade war has been a significant factor in the country's budget deficit. The imposition of tariffs by both countries has led to a decline in trade, which has reduced government revenue from import and export taxes. During the period under review, China's exports suffered a sharp decline of 12.4% on yearly basis to US$285.32 billion, which was the steepest drop since February 2020 with the US, one of its biggest trading partners contributing at 23.7%. Similarly, imports were down largely from the US.
Further, the heavy funding of the Ukrainian war has also contributed to the budget deficit, as the US has provided significant military aid to the country. The US is by far the largest country funding the Ukrainian war. To date, the US has provided over US$113 billion to Ukraine.
Furthermore, the ongoing Russia-Ukraine conflict has also contributed to global inflation, with rising energy prices affecting economies worldwide. The US has been affected by this inflationary pressure, which has reduced the purchasing power of US consumers and businesses.
The national debt has increased US$4.7 trillion since President Joe Biden took office in January 2021, and is expected to keep rising in the face of annual budget shortfalls of at least US$1 trillion per year. So far in fiscal year 2023, the government has spent US$1.16 trillion more than it has collected and the Biden administration is predicting a US$1.5 trillion budget deficit when the fiscal year ends in September.
Therefore, the widening of the US government budget deficit highlights the ongoing challenges faced by the US government in managing its finances. The impact of the US-China trade war, funding of the Ukrainian war, and the Russia-Ukraine conflict continues to have far-reaching consequences for the US and the global economy, including rising inflation and reduced economic growth.
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