PUBLIC EXPENDITURE PROGRAM
Meaning of public expenditure
Objectives of public expenditure
Public expenditure's objective is supposed to provide security for the
country or state and to promote the well being of the citizens. Major
government spending can be classified as national defense, education,
social welfare, interest on the national debt and pensions.
General objective
By the end of the lesson the learner should be able to explain the meaning
and nature of public expenditure
Specific objectives
By the end of the lesson the learner should be able to;
a) explain the meaning and objectives of public expenditure
b) to account for the size and growth of public expenditure
c) explain the theories that explain increase of public expenditure
d) explain the effects of public expenditure
e) account for the growth of public expenditure
f) explain the role of development expenditure of developing
countries102
This refers to the expenses which the government incurs for its own
maintenance, for the society, as well as for the economy as a whole
Public expenditure can be defined in different ways as:
a) The expenditure of central and county government;
b) The combined government expenditure plus disbursements out of the
National Insurance (social security) Fund; or
c) The total government expenditure as in (b) plus expenditure of the
public corporations
The basis on which public expenditure once defined is analyzed, does not,
however, affect the total figure which represents the absorption of
resources by the public sector. The analysis can be undertaken-on the
following basis:
a) Spending authority: Central government, local authorities, public
corporations,
, b) Economic category: Current expenditure account (expenditure on
goods, services, transfer payments), capital account (investment),
c) Programme: defence, agriculture, housing.
Public expenditure is spending made by the government of a country on
collective needs and wants such as pension, provisions security,
infrastructure, etc. Public expenditure means the expenditure on the
developmental and non-developmental activity such as construction of
roadways and dams, and other activity.
The accounts of the central government are centered on two funds, the
Consolidated Fund, which handles the revenues from taxation and other
miscellaneous receipts such as broadcasting license fees, interest and
dividends, and the National Loans Fund which conducts the bulk of the
governments domestic borrowing and lending.
Each government ministry works out how much money it wants to spend
in the coming Financial Year which, in Kenya starts on 1 st July in each year
and ends on 30th June on the following year. This is known as preparing
estimates. There are two types of estimates, -estimates of Capital
Expenditure and estimates of Recurrent Expenditure.
Government departments also have to prepare estimates for the next
financial year for presentation to parliament.
Any department which earns revenue for sales of goods or services to
the public shows this as an appropriations-in aid, which is deducted from
its estimated gross expenditure to show net expenditure, that is, the
actual amount required of the Exchequer.
The estimates also include Grants-in aid i.e. grants made by the central
government to local authorities to supplement their revenue from their
levying of rates.
TYPES OF PUBLIC EXPENDITURE
a)Revenue Expenditure and Capital Expenditure:
Public expenditure has been classified into various categories. Firstly,
Government expenditure has been classified into revenue expenditure and
capital expenditure. `
, Revenue expenditure is a current or consumption expenditure incurred on
civil administration (i.e., police, jails and judiciary), defence forces, public
health and education. This revenue expenditure is of recurrent type which is
incurred year after year. On the other hand, capital expenditure is
incurred on building durable assets. It is a non-recurring type of
expenditure. Expenditure incurred on building multipurpose river projects,
highways, steel plants etc., and buying machinery and equipment is
regarded as capital expenditure.
Transfer Payments and Expenditure on Goods and Services.
Another useful classification of public expenditure divides it into transfer
payments and non-transfer payments. Transfer payments refer to those
kinds of expenditure against which there is no corresponding
transfer of real resources (i.e., goods and services) to the Government.
Expenditure incurred on old-age pensions, unemployment allowance,
sickness benefits, interest on public debt during a year etc., are examples of
transfer payments because the Government does not get any service or
goods against them in the particular year.
On the other hand, expenditure incurred on buying or using goods and
services is a non-transfer payment as against such an expenditure, the
Government receives goods or services. It is therefore called expenditure
on goods and services. It may be noted that expenditure on defence,
education, health etc., are non-transfer expenditure as in return for these,
Government obtains the services of army personnel, teachers, doctors etc.,
as well as some goods or equipment’s used in these activities.
Investments expenditure is undoubtedly non-transfer expenditure as
through it Government obtains capital goods. It is worthwhile to mention
that whereas in case of transfer payments, it is the beneficiaries that
decides about the use of resources, in the case of non-transferable type of
expenditure, the Government itself decides about the use of real resources,
especially whether they are to be used for consumption or investment
purposes.
Developmental and Non-Development Expenditure
Another useful classification of public expenditure rests on whether a
particular expenditure by the Government promotes development. All those
expenditures of Government which promote economic growth are
Meaning of public expenditure
Objectives of public expenditure
Public expenditure's objective is supposed to provide security for the
country or state and to promote the well being of the citizens. Major
government spending can be classified as national defense, education,
social welfare, interest on the national debt and pensions.
General objective
By the end of the lesson the learner should be able to explain the meaning
and nature of public expenditure
Specific objectives
By the end of the lesson the learner should be able to;
a) explain the meaning and objectives of public expenditure
b) to account for the size and growth of public expenditure
c) explain the theories that explain increase of public expenditure
d) explain the effects of public expenditure
e) account for the growth of public expenditure
f) explain the role of development expenditure of developing
countries102
This refers to the expenses which the government incurs for its own
maintenance, for the society, as well as for the economy as a whole
Public expenditure can be defined in different ways as:
a) The expenditure of central and county government;
b) The combined government expenditure plus disbursements out of the
National Insurance (social security) Fund; or
c) The total government expenditure as in (b) plus expenditure of the
public corporations
The basis on which public expenditure once defined is analyzed, does not,
however, affect the total figure which represents the absorption of
resources by the public sector. The analysis can be undertaken-on the
following basis:
a) Spending authority: Central government, local authorities, public
corporations,
, b) Economic category: Current expenditure account (expenditure on
goods, services, transfer payments), capital account (investment),
c) Programme: defence, agriculture, housing.
Public expenditure is spending made by the government of a country on
collective needs and wants such as pension, provisions security,
infrastructure, etc. Public expenditure means the expenditure on the
developmental and non-developmental activity such as construction of
roadways and dams, and other activity.
The accounts of the central government are centered on two funds, the
Consolidated Fund, which handles the revenues from taxation and other
miscellaneous receipts such as broadcasting license fees, interest and
dividends, and the National Loans Fund which conducts the bulk of the
governments domestic borrowing and lending.
Each government ministry works out how much money it wants to spend
in the coming Financial Year which, in Kenya starts on 1 st July in each year
and ends on 30th June on the following year. This is known as preparing
estimates. There are two types of estimates, -estimates of Capital
Expenditure and estimates of Recurrent Expenditure.
Government departments also have to prepare estimates for the next
financial year for presentation to parliament.
Any department which earns revenue for sales of goods or services to
the public shows this as an appropriations-in aid, which is deducted from
its estimated gross expenditure to show net expenditure, that is, the
actual amount required of the Exchequer.
The estimates also include Grants-in aid i.e. grants made by the central
government to local authorities to supplement their revenue from their
levying of rates.
TYPES OF PUBLIC EXPENDITURE
a)Revenue Expenditure and Capital Expenditure:
Public expenditure has been classified into various categories. Firstly,
Government expenditure has been classified into revenue expenditure and
capital expenditure. `
, Revenue expenditure is a current or consumption expenditure incurred on
civil administration (i.e., police, jails and judiciary), defence forces, public
health and education. This revenue expenditure is of recurrent type which is
incurred year after year. On the other hand, capital expenditure is
incurred on building durable assets. It is a non-recurring type of
expenditure. Expenditure incurred on building multipurpose river projects,
highways, steel plants etc., and buying machinery and equipment is
regarded as capital expenditure.
Transfer Payments and Expenditure on Goods and Services.
Another useful classification of public expenditure divides it into transfer
payments and non-transfer payments. Transfer payments refer to those
kinds of expenditure against which there is no corresponding
transfer of real resources (i.e., goods and services) to the Government.
Expenditure incurred on old-age pensions, unemployment allowance,
sickness benefits, interest on public debt during a year etc., are examples of
transfer payments because the Government does not get any service or
goods against them in the particular year.
On the other hand, expenditure incurred on buying or using goods and
services is a non-transfer payment as against such an expenditure, the
Government receives goods or services. It is therefore called expenditure
on goods and services. It may be noted that expenditure on defence,
education, health etc., are non-transfer expenditure as in return for these,
Government obtains the services of army personnel, teachers, doctors etc.,
as well as some goods or equipment’s used in these activities.
Investments expenditure is undoubtedly non-transfer expenditure as
through it Government obtains capital goods. It is worthwhile to mention
that whereas in case of transfer payments, it is the beneficiaries that
decides about the use of resources, in the case of non-transferable type of
expenditure, the Government itself decides about the use of real resources,
especially whether they are to be used for consumption or investment
purposes.
Developmental and Non-Development Expenditure
Another useful classification of public expenditure rests on whether a
particular expenditure by the Government promotes development. All those
expenditures of Government which promote economic growth are
