The expenditure to be used by a government for the sake of public welfare is known as government expenditure or public expenditure. Government performs varieties of function for the maintenance welfare functions. For such maintenance, government needs to spend money in different sectors. Such expenses incurred by the government are known as government expenditure.
The government expenditure can be classified into the following types;
It is a recurring expense. Such types of expenses are used in the terms of providing goods and services. It includes wage, salaries and so on. It is also called regular expenditure.
It is the expenditure in the assets such as in the purchase of items that last for the long period. For example, building hospitals, constructing roads, etc.
A transfer payment is a payment done for no goods and services. It includes the things like pensions, allowance, benefits, lottery payments, etc.
Government has to pay the principal and interest of the debt borrowed from the internal and external sources. In developing countries, a significant proportion of public expenditure goes to repayment of debts.
The major importance of government expenditure are as follows:
Maintaining law and order is the main function of government. Without law and order, government are misplaced with their activities. To maintain the law and order, government needs a huge amount of budget every year.
For economical progress, firstly, there must be the development of socio-economic infrastructure like road, electricity, transportation, school, hospital, etc. It is possible with the public expenditure because to develop such infrastructures, there should be a huge amount of capital.
Natural resources are the essential for the economic development of a country which needs a huge amount of capital. This is not possible by the private sector. So, public expenditure helps to explore and utilize the natural resources for the development of a country.
For the development of agricultural sector such as irrigation and power, seed farms, fertilizer factories, warehouses, etc. the government has to incur a lot of expenditure. To establish a larger industry, it requires a huge amount of capital. This is possible through government expenditure.
Government expenditure provides subsides, free education and healthcare facilities to the poor people. So, government expenditure is used as a powerful fiscal instrument to bring about an equitable distribution of income and wealth.
The government needs to allocate its budget to carry out administrative service of different agencies, department, ministries and concerned offices. The government provides various types of services to its citizens.
Government expenditure can be classified under the budget document of the government. The budget document includes tax and tables about the tax and expenditure policies of the government. Theoretically, government expenditure can be classified under three methods. All three classifications are described below in brief:
Such classification is found in the government’s budget document. Under the agencies classification, the total expenditure is classified by the spending agencies policies, such as personal services, travel, and transportation of goods, printing and policing, equipment and supplies. This classification tells little about the government activities and government policies.
Functional classification of expenditure is based on various functions of the government. This has been used in Nepalese budget document. It is classified into two categories:
Such type of expenditure is related to day to day activities. It constitutes the expenditure made on the following government organization:
It is related to the expenditure on development activities of the government. It consists of the following heads:
Economic classification shows the economic character of expenditure. This classification distinguishes between:
Current expenditure comprises the following items:
Capital Expenditure comprises the following items:
(Jha, Bhusal and Bista)(Karna, Khanal and Chaulagain)(Khanal, Khatiwada and Thapa)
Jha, P.K., et al. Economics II. Kalimati, Kathmandu: Dreamland Publication, 2011.
Karna, Dr.Surendra Labh, Bhawani Prasad Khanal and Neelam Prasad Chaulagain. Economics. Kathmandu: Jupiter Publisher and Distributors Pvt. Ltd, 2070.
Khanal, Dr. Rajesh Keshar, et al. Economics II. Kathmandu: Januka Publication Pvt. Ltd., 2013.
Classification of Government expenditure
Importance of Government Expenditure
Classification of Government Expenditure