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Copy of Classification and Pattern of Philippine public expenditure

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Mark Jim Ibus

on 15 October 2013

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Transcript of Copy of Classification and Pattern of Philippine public expenditure

Classification and pattern of Philippine public expenditure

Submitted by: Mark Jim Ibus

Classification and Pattern of Philippine public expenditure

PUBLIC EXPENDITURE
-is spending made by the government of a country on collective needs and wants such as pension, provision, infrastructure, etc.
Importance of Public Expenditure
1. To promote rapid economic development.
2. To promote trade and commerce.
3. To promote rural development
4. To promote balanced regional growth
5. To develop agricultural and industrial sectors
6. To build socio-economic overheads eg. roadways, railways, power etc.
7. To exploit and develop mineral resources like coal and oil.
8. To provide collective wants and maximize social welfare.
9. To promote full - employment and maintain price stability.
10. To ensure an equitable distribution of income.
Thus public expenditure has to create and maintain conditions conducive to economic development. It has to improve the climate for investment. It should provide incentives to save, invest and innovate.
Objective of Public Expenditure
1) Administration of law and order and justice.
2) Maintenance of police force.
3) Maintenance of army and provision for defense goods.
4) Maintenance of diplomats in foreign countries.
5) Public Administration.
6) Servicing of public debt.
7) Development of industries.
8) Development of transport and communication.
9) Provision for public health.
10)Creation of social goods.
Classifications of Philippine Public Expenditures
1) Capital And Revenue Expenditure :-
Capital Expenditure of the government refers to that expenditure which results in creation of fixed assets. They are in the form of investment. They add to the net productive assets of the economy. Capital Expenditure is also known as development expenditure as it increases the productive capacity of the economy. It is an investment expenditure and a non-recurring type of expenditure. For Eg. Expenditure - on agricultural and industrial development, irrigation dams, public -enterprises etc, are all capital expenditures

2) Development And Non - Developmental Expenditure / Productive And Non - Productive
Expenditure :-
Expenditure on infrastructure development, public enterprises or development of agriculture increase productive capacity in the economy and bring income to the government. Thus they are classified as productive expenditure. All expenditures that promote economic growth development are termed as development expenditure.
3) Transfer And Non - Transfer Expenditure :-
Transfer expenditure refers to those kind of expenditures against there is no corresponding transfer of real resources i.e., goods or services. Such expenditure includes public expenditure on :- National Old pension Scheme, Interest payments, subsidies, unemployment allowances, welfare benefits to weaker sections etc. By incurring such expenditure, the government does not get anything in return, but it adds to the welfare of the people, especially to weaker sections of society. Such expenditure results in redistribution of money incomes within the society.
The non - transfer expenditure relates to that expenditure which results in creation of income or output The non - transfer expenditure includes development as well as non - development expenditure that results in creation of output directly or indirectly. Economic infrastructure (Power, Transport, Irrigation etc.), Social infrastructure (Education, Health and Family welfare), Internal law and order and defense, public administration etc. By incurring such expenditure, government creates a healthy environment for economic activities.

4) Plan And Non - Plan Expenditure
The plan expenditure is incurred on development activities outlined in ongoing five year plan. In 2009-10, the plan expenditure of Central Government was 5.3% of GDP. Plan expenditure is incurred on Transport, rural development, communication, agriculture, energy, social services, etc.
The non - plan expenditure is incurred on those activities, which are not included in five-year plan. It includes development and non - development expenditure. It includes :-Defense, subsidies, interest payments, maintenance etc.

5) Other Classification (Mrs. Hicks)
Mrs. Hicks classified Public Expenditure on the basis of duties of government. It is as follows :-
a) Defense Expenditure :-
It is expenditure on defense equipments, wages and salaries of armed forces, navy and air force etc. It is incurred by government to provide security to citizens of country from external aggression.
b) Civil Expenditure :-
Government/incurs this expenditure to maintain law and order and administration of justice.
c) Development Expenditure :-
It is expenditure on development of agriculture, industry, trade and commerce, transport and communication etc.
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