What are twin deficits?

Twin deficits refer to the simultaneous occurrence of a fiscal deficit and a current account deficit within a country. The fiscal deficit arises when a government's expenditures exceed its revenues, while the current account deficit indicates that a country is importing more goods and services than it is exporting. These deficits can reflect broader economic issues, such as overspending or reduced competitiveness in international trade. They are often seen as indicators of potential financial instability and can lead to increased borrowing or currency depreciation.