public finance G.assignment

UNIT THREE
ETHIOPIAN PUBLIC FINANCE

Budget in Ethiopia
The word now means, “Plans of government finances submitted for the approval of the
legislature”. The budget reflects what the government intends to do. The budget has become the
powerful instrument for fulfilling the basic objectives of government. The budget covers all the
transactions of the central government.
Budget is a time bound financial program systematically worked out and ready for execution in
the ensuing fiscal year. It is a comprehensive plan of action, which brings together in one
consolidated statement all financial requirements of the government. The budget goes into
operation only after it is approved by the parliament. A rational decision regarding allocation of
resources to satisfy different social wants requires considerable thinking and planning. Thus
budget is an annual statement of receipts and payments of a government.
Functions of Budget
The functions of budget include the following:
 proper allocation of resources: - to relate expenditure decisions to specified policy

objectives and to existing and future resources;
 to relate all major decisions to the state of the national economy;
 long term economic growth:- to ensure efficiency and effectiveness in the
implementation of government programs;
 To facilitate legislative control over the various phases of the budgetary process.
 equitable distribution of income and wealth and
 Securing economic stability and full employment.
It implies that the objective of budget policy is to take corrective measures or to adopt regulatory
policies to remove imperfection or inefficiencies of market mechanism. Besides, the objective of
the budget policy is to make provision of social goods or the process by which total resources are
divided between private and social goods. It means that the objective of budget policy is to
ensure equitable distribution of income and wealth. This may be termed as distribution function.
Third objective of budget policy is to maintain a high level of employment, reasonable degree of
price stability and an appropriate rate of economic growth.
To implement its economic functions government raises revenues through taxation. Fees and
charges, and spend them on different programs and activities. This process of rising revenues and
spending by government is performed through budgeting. Budget thus stands for the yearly
plans/forecasts of government revenues and expenditures. The budgeting process starts from the
initial stage of preparing the annual revenues and expenditures forecast and end at the stages of
approval by the higher government body followed by its implementation.
The Concept of Budgeting in Ethiopia

The government budget represents a plan/forecast by government of its expenditures and
revenues for a specified period. Commonly government budget is prepared for a year, known as
a financial year or fiscal year. In Ethiopia the fiscal year is from July 7 of this year to July 6 of
the coming year (Hamle 1-Sene 30 in Ethiopian calendar). Budgeting involves different tasks on
the expenditures and revenues sides of government finance. On the side of expenditure, it deals
with the determination of the total deals with the determination of the total size of the budget (i.e
total amount of money for the year), size of outlays on different functions, and the magnitude of
outlays on various activities; on the revenue side, it involves the determination of the size of the
overall revenue and foreign aid.
Furthermore, budgeting also address the issue of the budget deficit (i.e. the excess of outlays
over domestic revenues), and it’s financing. Budgeting is not solely a matter of finance in the
narrow sense. Rather it is an important part of government’s general economic policy. Budget is
not solely a description of fiscal policies and financial plans, rather it is a strong instrument in
engineering and dynamiting the economy and its main objectives are to devise tangible directives
and implement the long term, medium term, and annual administrative and development
programs”.
Budget Structures in Ethiopia

Budget structures are the formats that organize budget data. Budget data could be classified in
different ways and for different purposes. In the early days, for instance, budget classification
basically focused on providing a better understanding of the intentions and purposes of
government for which funds were planned and to be spent. Later on, the budget structures started
to be influenced largely by the issue of accountability. That is in addition to providing
information on what the government proposed to do, the budget structures indicate the full
responsibility of the spending agency. To this end the budget heads or nomenclatures the full
responsibility of the spending agency. To this end the budget head or nomenclature of the budget
are mostly mapped to each spending agency. This should not, however, imply unnecessarily
extended and detailed structure (or mapping). Perhaps, due consideration must be taken to make
the structure manageable and appropriate. The first classification of the budget is between
revenue and expenditure.

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UNIT THREE

ETHIOPIAN PUBLIC FINANCE

 proper allocation of resources: - to relate expenditure decisions to specified policy

The Concept of Budgeting in Ethiopia

Budget Structures in Ethiopia

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