Given that G-T=(S-I) + (X-M) , how could a fiscal deficit be financed either by having a higher saving (S>I) or by having a trade deficit (X
G-T is the fiscal deficit. If G is higher than T, then the government has a budget deficit. Hence, S or M must increase sufficiently to fund the deficit. It can also be a combination of the two. A fiscal deficit means that government expenditures are higher than taxes, if that is the case, the government needs to borrow in the market. If saving does not increase, this would be impossible. X-M is your current account surplus or deficit. If X-M is positive you have a current account surplus and thus a capital account deficit (you are lending funds to foreigners), if X-M is negative you have a current account deficit and thus a surplus in the capital account (foreigners are lending fund to domestic country). The surplus (net capital inflows) in your capital account helps fund your budget deficit. Keep in mind that these adjustment are necessary in order for the equality to hold.
Thank you so much for your reactivity, you have been very helpful to me. However, i need more clarification about the capital account : why do i lend funds to foreigners when i have a current account surplus? i think this would be the point that i missed.
If you have a current account surplus, export are higher than imports. In the foreign country, this means that they have an current account deficit. A current account deficit occurs when domestic consumer spend more on import than they save, since there is a decrease in saving, I and (G-T) need to be compensated by external fund. In other words, if you spend more than you save, you need to borrow from somewhere. Another way to see this is a current account deficit in one country is equal to an account surplus in another, if another country export more than is imports, it means that they have excess savings. The excess saving is going to be lent or invested in the foreign country. This is the conceptual explanation, but the accounting equation (S-I) = (G-T) - (X-M) shows what needs to happen if you have a decrease or increase in any of the variables. In the end, the equation needs to balance.