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Introduction to PFM

The document provides an introduction to Public Financial Management (PFM), focusing on the acquisition and disposal of resources by governments at various levels. It outlines the scope and aims of PFM, emphasizing its importance in governance, economic intervention, and the management of public funds. Additionally, it discusses the instruments used by modern governments to regulate the economy, including fiscal and monetary policies.

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Ahmadzia Hamidi
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3 views

Introduction to PFM

The document provides an introduction to Public Financial Management (PFM), focusing on the acquisition and disposal of resources by governments at various levels. It outlines the scope and aims of PFM, emphasizing its importance in governance, economic intervention, and the management of public funds. Additionally, it discusses the instruments used by modern governments to regulate the economy, including fiscal and monetary policies.

Uploaded by

Ahmadzia Hamidi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Introduction to PFM

 In this Chapter ………….


 Introduction
 Objective
 Main Content
 Basics of Public Financial Management
 Scope of Public Financial Management
 Aim of Public Financial Management
 Modern Governments’ Intervention and Instrument in the Economy
 References/Further Reading
Introduction
The subject of public financial management is the acquisition and
disposal of resources by the government, be it federal, state or local
government. It is about government income and expenditure. It
deals with budgets which are statements about how a government
plans to obtain income (income) and the ways a government plans to
spend such income during a particular financial year.

A budget can be deficit, surplus or balanced. The flow and


management of funds is the life blood of system of public
administration. In public administration, the system of public
financial management rest on designs and reforms over the years.
Scope of Public Financial Management

 For all types of governments (Federal, State or Local) public financial


management is vital in the governance than other matters; since money
(funds) is the hub of the wheel of every government activity. Behind the
formulation and execution of financial decisions relay on many questions of
public policy, and this questions range from:
 what fiscal measures are to be put in place to ensure high standard of living,
satisfactory income distribution, resource allocation and public
accountability?
 More questions on the tax system to be more equitable and efficient in order
to generate substantial funds to meet the needs of the people?
Aim of Public Financial Management

The aim of public financial management is to enhance the management


of the flows of money or financial resources through government and
its agencies in the modern economy. The following functions are the
summary of aims of government in a modern economy.
• The provision of essential public services.
• The control of certain sectors of the economy
• The application of social policy
• And that government assumes responsibility for the overall state of
the economy. .
The scope of governance covers the following key responsibilities
that require financial management and control.

1.The up-keep of the president, legislature, the judiciary, maintenance


of law and order, provision of facilities for defense and diplomatic
representation including discharge of international responsibilities.

2.The direct or indirect involvement in enterprises example the postal


services, energy, inland waterways, oil and gas etc. It could be
through financial assistance or advisory services. .
3. This involves revenue and expenditure. Revenue is taxation and
its distribution among the community. Expenditure is on social
services like education, health etc.

4. The maintenance of a high and stable level of employment, the


encouragement of growth in the economy and improve productive
capacity, ensure the relative stable prices and the preservation of
solvency in its external business relationships.
Modern governments’ Intervention and Instrument in the Economy

Modern governments intervene in the market economy in other to fine


tune it; this made possible through regulation, controls and standard
legislation.
Government intervenes through the provision of public goods and
income distribution. The government is concerned with the welfare of
its citizens.
Government invests on projects, supposedly, not attractive to private
investors, but beneficial to the citizens. These projects are relatively
low in profitability. Instruments for government intervention in the
economy include the following. .
 Fiscal policies- these are government policies through which
government revenue and expenditures are managed.

 Monetary policies- government through the Central Bank targets the


quantity of money in circulation within the economy, considering the
cost (interest) and general credit direction.
 Direct control- this comes in the form of rules and regulations
involving the passing of laws or executive directives as a supporting
tool to enforce implementation of policies.
 Income policy- this aims directly at regulating the disposable incomes
accruing to earners to meet government macro-economic objectives, ensuring
equitability in income and productivity level. These include minimum wage
laws etc.
 Debt management policy- government, normally, incurs internal and external
loans for some important reasons. A policy as an instrument of debt
management will be in place to avail the team of managers to meet current
fiscal obligations.

 Exchange rate policy- with international trade, the exchange rate (price of
foreign currency) is of value in the economy, as it affects and influences
virtually all other prices for the purpose of controlling the economy.
REFERENCES/ FURTHER READING

 Abianga, E. U. (2009). MBA728 Public Financial Management. Lagos.

 Ekpung, E. (2001). The Essentials of Public Finance and Public Financial


Management. Calabar: University of Calabar Press.

 Ola, R.O.F. & Offiong, O.J. (2008). Public Financial Management. Lagos:
AMFITOP Books. .

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