What are fiscal imbalances?

Fiscal imbalances are when a group doesn’t have enough money to pay for what it needs to do.

Imagine you and your friend start a lemonade stand together. You both put in some coins to buy lemons, sugar, and cups. But one day, your friend uses most of the money to buy extra candy to attract more customers, while you just keep doing your part. Soon, you realize that your friend is spending way more than they should, and there’s not enough money left for both of you to cover costs.

This is like fiscal imbalance. A group, like a city or a country, might have different parts working together, like you and your friend. But if one part keeps using more money without adding its own, the whole group starts struggling to pay for everything it needs to do.

If this goes on too long, the group might not be able to keep running smoothly, just like your lemonade stand could run out of supplies or even close down.