Difference between government balance and increase in debt

Government debt may increase even if a surplus is realised in a particular year, and it it may fall even when there is a deficit. There are three possible explanations for this. First, the government may incur debts in order to finance financial assets, which are not counted towards the government balance. For example, by issuing loans, purchasing shares or depositing money in bank accounts. Second, according to statistical guidelines, cash paid and received in a particular calendar year may be recorded in another accounting year, with the effect that they do not impact the balance of the reporting year, but do impact financing, or vice versa. Finally, debt valuation may offer an explanation. This could be a bond issuance premium, for example.

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