public finance assignment help

public finance assignment help

The Importance of Public Finance in Economic Development

1. Introduction

In summary, maximizing the likelihood of these positive benefits would provide evidence of managing public finances that foster long-term socio-economic development, inclusivity, and equitable opportunities for the population. However, it is important to note that short-term macroeconomic stability often dominates, which can lead to overestimating the limits of fiscal space for development financing. Additionally, in the current political economy space, the contribution of public finances to human capital and social welfare is heavily reliant on borrowed resources, particularly enhanced concessional external financing and public debt. Properly structured, monitored, and evaluated investment in the social sectors (physical and human) can play a pivotal role in eradicating poverty and income inequality, and bolstering sustainable and inclusive human development.

These development gains can be achieved under the assumption that current and future workers are sufficiently educated, knowledgeable-skilled, healthy, and economically active. This will support present and future tax efforts and mitigate the country’s debt burden.

v) Positive impact on the universal well-being of society.

iv) A reduction in the level of poverty and income inequality, reversing the current trends.

iii) A conducive business investment-friendly environment with affordable factors of production. This will trigger more private sector investment in the country, contributing to additional economic growth that complements public investments. It will also alleviate the current level of unemployment, rejuvenate human development, and minimize social disillusionment.

ii) Productive and efficient allocation of resources and human capital through the provision of quality public investment. This includes both record levels of quantity and quality in vital public physical and social infrastructure. These investments provide key supporting complementarities to private sector investment, reduce transaction costs of doing business, and create jobs for income-generating activities for the active population in the country.

i) Poverty alleviation through an increase in the budget envelope for spending on education, health, and other social services. This leads to more inclusive economic growth and human development.

Financing public investment at low cost, with policy-induced low inflation and non-inflationary domestic credit expansion or through additional fiscal resources from revenue mobilization has several strong benefits for society. These include:

2. Role of Public Finance in Economic Development

The development of a country is judged by the increase in the number of people who are employed. Because of the increase in population and less in the productive area, the importance of employment has increased. During the pre-independence period, the problem of unemployment existed, and public undertakings were started to provide employment and then the benefits of public undertakings were realized and merged as one of the programs for economic development. The service sector produces many jobs and this has given rise to many pros and cons related to the open economy. In an open economy, the service sector has great potential to grow and also boost the economic system of any country. The economic activity is connected and disconnected because of the revenue that is spent in any economic activity of the rural and urban economy of any country.

Investing in various projects has helped to ensure the rapid economic development of a country. Public finance deals with the financial management of public (government) finance. It is also the finance of the public sector and is concerned with the revenue raised from the general public and expenditure that results from its activities. The role of public finance in the economic development of a country is important. It is considered as the key to economic development of the country. The issue of public finance is not always economic development but is more on employment which is considered the cornerstone of economic development. Public refers to the government. Investment in infrastructure development of a country needs money, and it is the government who is in charge of public finance.

3. Challenges in Public Finance Management

To ensure the availability of macro balance and funds for resource mobilization (both internal and external), the treasury has been performing a vital role in the Nepalese economy. Because of the weak financial position of the treasury, it has been difficult to constantly support the budget violation in the area of fiscal discipline. Consequently, the treasury is unable to discharge its day-to-day responsibilities such as executing the payment orders, funding the treasury single account (TSA), maintaining credit position with the Central Bank, etc. Furthermore, the wastage of time by the treasury while handling deposit and withdrawal operations of the government is another matter of great concern. Therefore, it has been illustrated that there is a significant association involving the TSC and the treasury office. In short, the treasury security has been playing a crucial role in making the budgetary discipline by helping to minimize and properly manage funds. So, it must be managed properly and daily to support the sustaining nation’s economy.

The spectrum of public finance is associated with fiscal policy in the macroeconomic perspective. In the macroeconomic criterion, public finance provides a number of services beneficial for the society or nation as a whole. The developing countries have to emphasize on the foundation of public finance for envisaging maximum economic development. Therefore, various problems are being faced by the developing countries in connection with public finance. These problems can be treated as the challenges for the related sustainability in the sphere of managing public finance.

4. Strategies for Effective Public Finance Management

Secondly, public finance management is sensitive due to the multiple players in the process. It is a decentralized process that the central government is sensitive to make up for a larger part of the revenues and the small part funded by the sub-national units. Despite this unequal share of the funding, these sub-national units, provinces, and local governments have to be enlisted in the fulfillment of these policy agendas in order to establish accountability, development, and a well-run society. It is natural that, for example, a teacher domiciled at a school far away from the city will identify more with the local council project than a national project due to the immediacy and priority that affects his/her life. This therefore calls for cooperation and interaction of all the players. Managing their collective interest and ensuring equitable participation of the actors in the public financial management process is also sensitive and difficult for a DMC. Germane to the conduct and effective management of public finance, the following functions of public finance management are. These functions have a bearing on financial resources and the general administration of the finances of the state.

The importance of effective management of public finance as a tool for attaining political and economic goals makes it indispensable for policymakers and development managers of the public sector to identify an effective strategy to guide the public finance management process. Various factors make public finance management difficult and sensitive. First is the need to sustain the organizations responsible for managing it. Keeping the operation of the public sector afloat in terms of salaries, office materials, transportation, materials development, and implementation of the various projects and services offered to the citizenry requires money and resources. It is in the public financial management sector that these resources are generated and planned for their effective management and utilization. It is also within this sector that once an absence of funds or resources can be identified, then they can be mobilized for the operation of the public finance sector itself and other service departments within the public sector.

5. Conclusion

This approach and analysis conducted within it differs substantially from conventional growth models characterized by classical production functions and aggregate dynamics. Nicholas Kaldor emphasized the role of demand-determined growth forces, and this paper takes on this Kaldorian insight. The dynamic general equilibrium modeling framework is both conceptually tidy and relevant for policy analysis of the effects of government spending since government spending could perhaps be expected to affect demand and relative prices as shooting through the n model without due regard for actual macroeconomic conditions. The interest rate in the model is fixed and given; the real cost of borrowing is properly captured by the inflation rate. Ultimately, an important implication of excessively expansionary spending in the model is to bid up the nominal interest rate, increasing these conversion costs.

While Lansaack’s views show the way the capital market adjusts after a tax-induced interest rate change, the Swedish economist Wnning’s views indicate how the level of capital stock changes so as to re-establish a balance. Recent work in this tradition has paid greater attention to market imperfections. Perhaps because of Latin America, the relationship between market imperfections and public finance has become an area of study of paramount importance in the last decade. Other recent contributions illustrate many ways that public finance considerations are critical to understanding developing economies.