What must be done to close savings deficits according to the savings and investment balance approach?

To address savings deficits using the savings and investment balance approach, borrowing from abroad can be a necessary step. When a country experiences a savings deficit, it means that domestic savings are insufficient to finance domestic investments. This imbalance can lead to a reliance on foreign capital to maintain growth and investment levels.

By borrowing from abroad, a country can access the financial resources needed to fund investments that exceed what can be generated through domestic savings. This borrowing often takes the form of foreign direct investment (FDI), loans, or issuing bonds to foreign investors. The goal is to bridge the gap between domestic savings and required investments, enabling continued economic activity and the promotion of domestic growth initiatives.

Improving domestic savings programs, increasing local investments, or reducing foreign investments could also impact the savings-investment balance, but the most direct and immediate method to close the deficit in the short term is through borrowing from external sources.