Not only does huge fiscal deficit on its own damage the economy, but also way of financing that.

The advantages of using a fiscal deficit to finance growth are obvious in the short term if one is unable to attract profitable private investment in core areas required for industry and welfare. However in the presence of a participation required from the private sector, it does crowd out private investment. 

Also deficits impact when you are part of global trade mechanisms as your currency is adversely affected allowing lower quality competitiveness in exports and higher domestic inflation as seen frequently in African and Latin American Economies. 

However, for required core investment in infrastructure and marginal welfare of the ultra poor, there has been no better response than large deficit financing and/or aid for the social investment to be made in sectors like education healthcare and provision of basic food and water, electricity, roads and required trade infrastructure. 

Even the European budget is significantly devoted to such expenses that are pressures on a final deficit financing, employed frequently by the United States as well, as it enjoys the benefits of a reserve currency.

Dear Muhammad Imran

Greetings,

I think it is a big question , the fiscal deficits may be happen in any country , so two issues here is very important to answered ( why this deficits? , how can minimize it ?) , so many countries may think mainly  in loans or taxes  to finance it, these factors must used effectively and balanced , otherwise may be effect negatively in the economic of country.

Best Regards,

Dear Muhammad Imran

Greetings,

I think it is a big question , the fiscal deficits may be happen in any country , so two issues here is very important to answered ( why this deficits? , how can minimize it ?) , so many countries may think mainly  in loans or taxes  to finance it, these factors must used effectively and balanced , otherwise may be effect negatively in the economic of country.

Best Regards,

It really depends on the country because a budget deficit is not always a negative.  Some other factors have to be considered before an answer is clear like:  Is it hurting the country's credit?  Is it affecting the value of its currency?  Is the economy growing?  Are jobs being created?  Is the country's infrastructure improving?  As you can see, there are many factors to be considered.  This is not a simple yes or no question.  It depends on the circumstances surrounding the government borrowing. 

Budget deficit do affects the growth rate of the economy. High interest rate will force the government to increase taxes to finance the debt and it will slow down the economy. As you may see in my work (attached link) the budget deficit also connected and affects the political system.

http://onlinelibrary.wiley.com/doi/10.1111/j.1468-0343.1995.tb00114.x/abstract

Dear Mohammed,

in the U.S. the big deficit doesn't damage but enhances the economy built on war, prisons, weapons and Information technology. The economy of Israel is primary driven by war and debt to finance the war.

So big deficits only damage the economies of peaceful countries without their own currency for money printing such as Greece.

As a comment to Mr. Alexander:

i thought this will be just an economic "talk" about economic issue but i see to my sorrow some prejudice and misconceptions towards specific economies. 

The economy of Israel does not built on war.  Israeli People achieved in 68 years of existence much more technology, much more agriculture, much more bio-tech, much more education with only few (now a days appr. 6.5 millions) millions of  people, despite all wars and not for these wars.

For the truth - Brave, Wise, Well Educated, and long sight vision of the Israeli people leads the most sophisticated methods of human wellbeing all over the world including our European friends and our Asian friends, and our friends in the US. :),

let's admit it, we succeeded despite the wars and not for the wars.  When you fight for existence against more than 7 well-armed nations from all direction - and you win, that's not the money neither the force - it's the spirit and the pure belief in a just way.

For the most updated data that supports the above, especially the declining military budgets as part of the GDP you are more than invited to enter the Israeli www.cbs.gov.il site or to find it in the OECD publications where Israel is a full member of the OECD organization.

We seek for peace, and not war.

The Israeli strong economy is built upon humanity values like the sanctity of life and the tremendous wish to make the whole world better. 

I also have lot to say about the Greece economy but let their representative join us first. :)

Dear Eliyahu! I respect your emotions and your believe in humanitary values. But both do not change neither the budget deficit of Israel nor the military spendings only to fight against UN resolution 242.

I include both charts. All I said was, that a big budget deficit doesn't automatically damage the economy in some countries. They only damage the economy of the countries they assault and invade.

By counter in Greece, Portugal and Spain  the budget deficit damages the economy because they cannot print money.

Stay cool, it's just an observation.

Dear Alexander, I know i can't change your attitude, though the main issue here was not Israel and its security budget.  Israel does not fight the UN resolution.  Israel stands against its enemies.

Israel deficit sources are mostly civilian spending.  You may always argue a specific spending item to contribute the whole deficit (as you tried with the military) in order to make a political point.  That's not the issue and surly its not the case with Israel. 

As for the numbers - according to SIPRI (2013) you may see Israel in the white box is only 0.9% in compare with the world.

i can't paste it here so it's attached as a file.

Do remember, arguments as invasions like the US in Iraqi/Afghanistan/...Russia in Krims/Syria....and lot of other area of conflicts around the world can be transferred against every nation.

As you may surly know, Israel long planning strategy is to keep up with the 3% budget deficit out of the GNP rule, and that's what your table shows.

It will be most helpful and make a huge contribution to our discussion if you can show us other countries deficit % pace by the years 2000 and above so we can have more comprehensive sight.

I think deficit factor is really one of important issues in economic now a days and has its impact on a nation's growth, reallocation of resources, wellbeing of its citizens and also has its affect over the whole world economy.  Learning its sources and how they affect other parameter will help us to better design stability and world economy growth.

Thanks Eliyahu Yeret

Fiscal Deficit,when it becomes unmanageable, is against the long term interests of a developing country like India.