What are fiscal imbalances?

Fiscal imbalances happen when a group, like a family or a country, spends more than it earns over time.

Imagine you have a piggy bank where you save your allowance every week. That’s like income, the money coming in. But if you buy too many candy bars and toys without saving enough, your piggy bank starts to get lighter. That’s like spending, the money going out. When spending is bigger than income for a long time, that's a fiscal imbalance.

Think about a family who eats cookies every day. They have a big jar of cookies on the table, that’s their savings. But if they eat more cookies than they add each week, the jar will slowly get empty. One day, there might be no cookies left! That's like when a country spends too much and doesn’t save enough, it can't keep up its usual way of living.

A fiscal imbalance is like running out of cookies without knowing you're doing it. It happens slowly at first, but if it keeps going, the family might need to borrow more money or cut back on other things, just like a country might have to take loans or reduce spending in big ways.