Primary Budget Balance

The primary budget balance is a government's budget balance excluding interest payments on its existing debt, calculated as government revenue minus government spending other than debt service; a negative value is called a primary deficit and a positive value a primary surplus. By stripping out interest costs, which mainly reflect past borrowing decisions rather than the current year's fiscal choices, the measure isolates whether current government policy is adding to or reducing the debt burden before the cost of servicing existing debt is taken into account. A government running a primary surplus can still see its total debt to GDP ratio rise if the interest rate on its debt exceeds the economy's growth rate, which is why the primary balance is watched alongside the overall budget balance and the level of public debt.