Public Revenue
- This is one of the branches of public finance.
- It deals with the various sources from which the state might derive its income.
- These sources include incomes from taxes, commercial revenues in the form of prices of goods and services supplied by public enterprises, administrative revenues in the form of fees, fines, gifts and grants.
Sources of Public Revenue
- Public Receipts (all the income of the government) = Public revenue + Public borrowing + issue of new currency
- Public revenue (public revenue is a part of public receipts) includes that income which is not subject to repayment by the government.
- Public money: Money received by a vote or collected for a purpose of Government expenditure and includes revenue from taxes and government charges, proceeds of loans raised on behalf of government, grants received by government, recoveries of loan principals, redemption and maturity of investments, sale or conversion of securities, sale proceeds on Government property, other recoveries,
or other funds for the purposes of Government and any other moneythat the Minister or Secretary to the Treasury may direct into a public or official bank account.
GOV’T EXPENDITURE POLICY & THE NATIONAL BUDGET
- Every financial year, the Government has to undertake planning and prepare a budget.
- In most countries, the ministry responsible for planning write a call circular letter to all government ministries, departments and agencies (MDAs) that self –accounting to begin to process of preparing the budget.
- The process involves meetings within the MDA where each department prepares their next year’s expenditure (and revenue where MDAs make income) and discuss it with the top management.
- In a government ministry, top management includes directors, commissioners chaired by the Permanent Secretary (or Principal Secretary as in Kenya). In a government agency (e.g. an investment or export promotion authority), top management is the executive committee including heads of department and chaired by the Executive Director.
- The process of budgeting involves sector stakeholder consultations where the technical staffs of MDAs discuss the plans and budgets with other relevant MDAs, private sector, donors, and civil society.
- In most organized countries, the Government has a 3-year Medium Term Expenditure Framework (MTEF) that is the basis for budgeting for those three years. MTEF shows priority sector, and budget estimates for the three years. Each MDA will prepare the Policy Statement – Ministerial Policy Statement (MPS) in cause of a ministry which are incorporated in the National Budget Framework Paper (NBFP).
- NBFP is the document that contains all MDAs plans and budgets that is supposed to be discussed by the legislature (the parliament) before the Budget Speech is red by the minister responsible for planning or finance, on behalf of the President of the country.
- The legislature (the parliament) has got various roles: legislating; approving the budget; oversight roles on government expenditure; and generally represent the views of their constituencies to the parliament. In most countries, the legislature (the parliament) is the representative or delegates of the people who elected them.
Public debt: Includes the principal loan, interest on that debt, sinking fund payments
in respect of that debt and the cost, charges and expenses incidental to the
management of that debt.
Budget: The Government plan for revenue and expenditure for a financial year
Budgeting: This is the process by which Government sets levels to efficiently collect revenue and allocate the spending of resources among all sectors to meet national objectives.
Capital expenditure: Any expenditure for the creation or acquisition of a fixed asset, inventory, other valuable physical stock.
Classified expenditure: The expenses and commitments incurred by an authorized agency for the collection and dissemination of information related to national security interests and include the cost of procurement and maintenance of related assets.
Types of National Budget
There are mainly three types of a budget:
Balanced budget: This is where expected revenue is equal to the planned expenditure for one financial year. This is very rare in most Sub Saharan African countries.
Surplus budget: This where expected revenue exceeds planned expenditure for one financial year. This too is very rare in most Sub Saharan African countries.
Deficit budget: This is where planned expenditure exceeds expected revenue for one financial year. This is very common in most less developed countries. The gap between available revenue and the deficit is usually funded by ODA (aid) in form of grants, and borrowing concessional loans from multilateral agencies (World Bank and IMF) and friendly countries. Sometimes, the country can undertake both internal and external borrowing.
