Germany's FY26 Budget Boosts Capital Expenditure, Deficit Rises
Germany's federal government, led by Finance Minister Lars Klingbeil of the SPD, has unveiled a significant increase in capital expenditure for the upcoming fiscal year. The budget projects a fiscal deficit of 4.4% of GDP, with a revenue deficit of Rs 1.9 lakh crore.
The FY26 budget sees capital expenditure soar to Rs 4.31 lakh crore, up from Rs 3.01 lakh crore in the previous year. This substantial increase is part of the government's debt-financed spending program set to commence in 2025. State tax devolution has also risen to Rs 5.30 lakh crore from Rs 4.55 lakh crore, while non-tax revenue has increased to Rs 4.40 lakh crore from Rs 3.34 lakh crore.
The fiscal deficit for the first five months of the fiscal year (April-August) stands at Rs 5.98 lakh crore, equivalent to 38.1% of the FY26 target. This figure represents the gap between government spending and receipts, excluding borrowings. It is higher than the 27% recorded in the same period a year ago.
The German government's FY26 budget signals a significant shift in fiscal policy, with increased capital expenditure and a higher projected fiscal deficit. The government aims to stimulate growth through debt-financed spending, with state tax devolution and non-tax revenue also on the rise.
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