Deficit agent

A deficit agent is an economic agent that consumes an amount greater than its income. That is, your expenses exceed your money inflows, producing a deficit. This forces you to seek third-party financing.

The deficit agent, in other words, is one who spends more than he earns. Thus, he is unable to save a surplus and needs to borrow.

It should be noted that economic agents or economic units are those individuals or institutions that carry out business or activities related to them. In addition, they can belong to the public or private sector, being families, companies and State entities.

As a consequence of their decisions, economic agents can acquire the role of deficit players. For example, if the government spends more than it collects from taxes.

The main characteristic of a deficit agent is that he cannot fulfill his obligations. That is, you cannot pay your creditors, which includes employees, in the case of a business.

Deficit players often seek financing in the markets to meet their commitments. As a counterpart, surplus agents offer credit in exchange for future returns. In this way, there is a complementarity.

Countries as deficit agents

Deficit agents can also be countries or governments. Here, we explain three situations in which this happens:

• Fiscal or public deficit: A state administration can count on a public deficit when it collects less than it needs. So it becomes a deficit agent.
• Trade deficit: Refers to the deficit that a territory obtains for the transactions of goods and services abroad. The deficit agent will then be the country that exports to a lesser degree than it imports. This is reflected in the trade balance.
• External deficit: In this case, the deficit agent would be a country, when the inflows of money from abroad are less than the outflows or payments abroad. This is not only the result of exports and imports (trade balance), but also of capital movements, for example, through remittance transfers.