A budget deficit refers to a situation where a government's spending exceeds its revenue within a given period, usually a fiscal year. In other words, it is an imbalance between what a government earns and what it spends. To finance the deficit, governments often borrow money by issuing securities such as treasury bonds or through other means like drawing on foreign exchange reserves. The accumulation of these debts over time can lead to macroeconomic imbalances and may result in higher interest rates, inflation, or currency devaluations.