Meaning and concept of Public Expenditure

Government expenditure refers to the expenditure made by the government in different sectors of the economy through its different ministry, departments and local bodies. With the increasing functions of government the value of government expenditure also increases. But the real importance of public expenditure can only be realized when such expenditure shows the productive result in the society. The government of Nepal has classified the government expenditure under the following three headings.

i)Regular/recurrent expenditure:

Recurrent expenditure is the day to day expenditure of the government. It is incurred to run the administrative functions of the government. It constitutes consumption and service expenses, subsidies and grants, protection expenditure and contingency expenses. Among these, the expenditure made on consumption, subsidies and grants, service and production is found relatively higher than other expenses.

ii) Capital/Development expenditure:

The capital expenditure is the expenditure made by the government on

Various social economic infrastructures. It is related to long term expenditure on the development program. In Nepal, capital expenditure includes the expenditure made on capital transfer, capital formation, investment, capital grants and contingency expenses. The past trends show that government spend about 40% of capital expenditures under the heading “capital formation, and capital grants.”

iii) Principle repayment expenditure:

principle repayment includes the expenditure made by the government for the principle repayment of domestic and foreign loan. In Nepal the share of principle repayment of foreign loan is more than that of domestic loan.

The following table shows these three types of classification of government expenditure of Nepal,