1. Tutorial 5 Public expenditures
BUDGET AND TREASURY
Tutorial 5
Public expenditures

2. Public expenditures
1. General considerations 2.

3. Public expenditure is the flow of financial means within the
public budget system. Thus, the funds are allocated within the
state’s fiscal functions. They stick to the principle of being nonrefundable
and non-equivalent. Public expenditure is covered by
public income, possibly including debt tools.

4. Public expenditure classification
In relation with public expenditure, there are two groups:
· government expenditure (G),
· transfers (Tr).
Government expenditure (“devouring” public expenditure) is divided by its character
into government consumption expenditure (CG) and government investment
expenditure (IG). Both categories contain funds not only for funding institutions, but
also for public projects and public expenditure programmes. In this case, the state
performs its allocation fiscal function.

5. The extent of the tendency of public expenditure to grow as regards the amount and
structure also depends on other relations. The following ones are often mentioned:
· social and demographic factors;
· threshold effects and war events (see the displacement effect – fig. 2);
· inflation tendency and higher cost rates of services;
· technological changes;
· soft budgeting;
· political interests and influence.

6. Public expenditure dynamics
Public expenditure dynamics can be measured in many various ways. Besides those
with little information capability, among nominal amount and various proportional
indicators (e.g. a share of public expenditure per inhabitant), there are also indicators
that take better note of some other economic facts. For instance, the nominal amount
says nothing about price development, changes in the number of inhabitants, etc. More
impartial indicators include a share of public expenditure in GDP. A deeper insight into
the dynamics of public finance is then analysed with public expenditure elasticity in
relation to GDP or marginal slope of expenditure to GDP.