Public Expenditure analysis and Management
is Public Expenditure Management (PEM) just another term for budgeting in the public sector? Not so. PEM differs from conventional budgeting (CB) in a number of ways. First, PEM focuses on outcomes and sees expenditures as a means to produce outputs which are needed to achieve desired outcomes. CB on the other hand focuses narrowly on expenditures on inputs. It preoccupies government agencies with minute details of line item expenditures with only tangential regard for the actual outcomes that budgets are supposed to promote and support.
This Course discusses sequencing issues related to budget reforms within the central government. It deals with management issues. It does not deal with the substance of policies. Whilst the public sector encompasses the different levels of government and public
enterprises, it deals only with central government financial management. Sequencing the reform for sub-national governments would need to take into account fiscal federalism
issues and the pace of decentralisation. Within the area of public financial management (PFM), this paper deals mainly with public expenditure management (PEM). It deals only partially with the issues related to revenue management. Discussing in depth sequencing
issues for revenue management reforms would need a separate review, which should concern both revenue administration and the tax policy, the choice between tax instruments depending
closely on policy issues.
Course Objectives
(a) Provision of collective wants in order to optimise society’s consumption in a rational way and to maximise social and economic welfare.
(b) Control of the digressionary tendency in the market economy. Public spendings should be designed to optimize the level of investment in such a way as to maintain full employment with growth. In a free enterprise economy, through public expenditure incurred for appropriate public works programme, the gap of inadequacy of investment in the private sector has to be filled adequately. Public spending is, thus, required to sustain the level of effective demand in an economy.
(c) Public expenditure should accelerate the tempo of economic development by constructing the infrastructure of the economy and by increasing capital formation for augmenting industrial activity for the production of goods and services,
(d) A better distribution of income is also an equally important goal under socialism. Public expenditure for providing public services should lead to a just distribution of welfare.