What is net borrowing in the public sector primarily used for?

Net borrowing in the public sector is primarily used to cover the national deficit. This means that when a government's total expenditures exceed its total revenues, it may need to borrow money to make up the difference. This borrowing typically comes in the form of issuing government bonds or taking loans, thereby increasing the national debt.

Covering the national deficit is essential because it allows the government to continue funding its operations, programs, and services without prompting immediate cuts or tax increases, which could have adverse economic effects. While borrowing can also support specific projects or initiatives, its fundamental role in the context of the public sector is to address the gap between what the government earns and what it spends, thus ensuring fiscal stability and continuity of public services.

The other options, while relevant in discussions of public finance, do not capture the primary purpose of net borrowing. For instance, funding new infrastructure projects can result from borrowing but is not the primary objective. Paying off national debt could be a use of borrowed funds, but it does not represent the overarching goal of net borrowing, which is to address current deficits. Facilitating international trade is not directly a function of net borrowing in the public sector.