Public finance basically deals with how the government generates, manage and distributes its finances for the growth of the economy. It revolves around the economic analysis of government budgeting and expenditure.
Public finance management(PFM) is very important in the
economic growth of a nation. It depends largely on the accountability of various government financial agencies on the expenditure and distribution of public funds. The major way of generating revenue by the government is through taxation. Taxation on goods, individuals, industries and corporate organisations.
Inadequate management of the generated revenue by government agencies hinder the economic growth of a nation. This is usually caused by high rate of corruption practices in the government. This is popular in developing countries just like Nigeria is experiencing. A situation where public agents loot public funds for their selfish benefits while the masses get little or nothing of the supposed government benefits.
Adequate utilization and distribution of public funds largely depends on the accountability and transparency of public agencies.
A nation’s resources are usually limited compared to the unlimited needs of the people. Therefore, adequate management of revenue available to the government would go a long way to boost the economy and reduce the nation’s dependence on foreign aid. This reduces unnecessary foreign debts.
IMPORTANCE OF PUBLIC FINANCE
There are various benefits of public finance which you probably can already figure out from the explanation above. Some of these benefits include;
Adequate distribution of wealth: The government carries this out by ensuring that the gap between the poor and the rich in the nation is not by a wide margin. This is controlled via varying taxation on different households. That is increasing taxation on the rich and providing subsidy for the poor citizens.
Public finance also provides amenities like health care services, good roads, educational facilities as well as security for the masses.
Public finance generally provides employment opportunities to the citizens of a country through its activities of providing for the people.
Furthermore, public finance through taxation, helps to stabilize prices of commodities and helps the government to regulate economic growth.
As an entrepreneur, how you respond to taxation is pretty much how you respond to public finance. Public finance is all about the government’s economic policies and management. This varies in different countries. While government economic activities might be favourable in some countries, it might be different in others.
In developing countries where corruption is the talk of the day, business owners have learnt to adapt and grow with the resources and conditions at their disposal.
As an entrepreneur, you’re a student of the economy. You adapt, learn and grow. It all makes you and the business stronger and better. It improves your competitive stamina. That is what challenges are for anyways, to shape us!
Questions… comments… ideas… I would love to hear from you!