Public spending

What is public spending?

Public spending is defined as that investment of financial resources made by a State to fulfill its functions.

A public expenditure, for example, will consist of offering citizens certain public services.

Ultimately, public spending comprises total government spending, both in the purchase of goods and services and in the granting of subsidies.

Characteristics of public spending

Public spending has the following characteristics:

• Must be executed by a public entity.
• Its inclusion as a budget credit You will need an authorization from the general courts, that allows it to use public resources to meet the objectives set out in the budget programs.
• It is binding and limiting, since it cannot exceed the total expenditure authorized by the legislature.
• Its purpose should be to public utility.
• Should meet and meet the needs of a community.

Classification of public spending

Public spending can be classified into:

• Administrative: Expenses made by public agencies and entities in order to offer public services, security, community services, housing, health, transportation and other economic services.
• Economic: identifies and groups public sector expenditures into similar and determined categories, according to the economic characteristics of the transaction. The economic public expenditure allows to allocate and classify the expenses, according to their economic purpose, in current expenses, capital, financial applications and transfers.
• Functional: organizes public spending according to the nature of the services provided by public entities to the community. Functional public spending allows establishing the general objectives and the means by which they are intended to be achieved.

Examples of public spending

Some public expenditures made by the State include:

• Education, security, public health, salary of civil servants.
• Construction of roads, bridges, sewers, drains, street paving, etc.
• Government office expenses.
• Public lighting and light subsidies.
• Salaries of state employees.

Importance of public spending

Public spending is one of the most relevant elements within the economic policy of a country, since it allows the State and its agencies to solve and satisfy the needs of the community.

Thanks to public spending they can defray costs of services such as security, justice, health or education.

Mismanagement of this spending can lead to a devaluation or adjustment that harms the country's economy.