Public finance - Macro & Micro levels

Dr.Mohamed Zaky

Faculty of Economics and Political SciencesCairo University

General overview

Public finance is concerned with role of government

Producing and introducing public good and services

Public Finance: Institutional Point of View

Structure of Egyptian Economy

Public sector

Private sector

Gov. sector

Non-Gov. sector

Central Gov.

Economic authorities

Public business

sector

Public sector

Services authoritie

s

Local Gov.

Public Finance: Economic Point of View

“Public finance is that branch of

economics which deals with the

income and expenditure of a

government” …

Adam Smith

Public Finance: Economic Point of View

GDPXI

(Public+Private)

C(Public+Private

)(Net Exports)

Public Finance

Budgeting Public Expenditure

Public Revenue

Public debt

Public finance on macro level

Fiscal Policy

Public Expenditure

Public Revenue

Public Debt

Budgeting

Public finance on macro level

Coordination between fiscal and monetary policies

Inflation target and of fiscal policy

Independence of central bank

Contractionary and expansionary fiscal policy

The most important subjects:

Budget input & outputDescription

Revenues

Chapter one: Taxes

Chapter two: Grants

Chapter three: Other revenues

Expenditures

Chapter one: Wages and Compensation of employees

Chapter two: Purchases of Goods And Services

Chapter three: Interests

Chapter four: Subsidies, Grants, and Social Benefits

Chapter five: Other Expenditures

Chapter six: Purchase of Non Financial Assets ( Investments)

Cash Deficit / (Surplus)

Acquisition of Financial Assets

Chapter seven: Acquisition of Domestic and Foreign Financial Assets

Lending proceeds and Sales of Financial Assets and other financial assets

Chapter four: Lending proceeds and Sales of Financial Assets and other financial assets

Net acquisition of Financial Assets

Overall fiscal Deficit / Surplus

Financing Sources

Chapter five: Domestic borrowing & issuance of securities other than shares

Loans repayment

Chapter eight: Domestic and foreign loans repayment

Net Borrowing

Issuance of securities other shares

Net Borrowing & issuance of securities other shares Plus Net Privatization Proceeds

Budget input & outputUses (Billion EGY. LE) Budget

2011/2012% Budget

2010/2011Resources(Billion EGY. LE) Budget

2011/2012% Budget

2010/2011Wages and Compensation of employees

117.5 20 94.6 Taxes and Duties 232.2 39 197.3

Purchase of Goods and Services 30.3 5 28.4 Grants 10.0 2 3.2

Interest 106.3 18 90.6 Other Revenues 107.4 18 80.2Subsidies, Grants and Social Benefits

157.8 27 115.9

Other Expenditures 31.5 5 31.1Purchase of non-financial assets (investments)

47.2 8 33.9

Tot. Expenses 490.6 83 394.5 Tot. Revenues 349.6 59 280.7Cash deficit (141.0) (113.8)

Acquisition of domestic and foreign financial assets

4.0 1 4.0 Receipts of lending and sales of financial assets

10.7 2 12.3

Net Acquisition of financial assets

6.7 8.3

Overall Deficit (134.3) (105.6)Domestic and Foreign Loans Repayment

99.1 16 82.4 Tot. Borrowing 233.2 39 187.6

Net borrowing 134.1 105.2Treasury contribution inthe fund of restructuring finance

0.3 0 0.3 PrivatizationProceeds

0.5 0 0.5

Net PrivatizationProceeds

0.2 0.2

Tot. Uses 594.0 100 480.9 Tot. Resources 594.0 100 480.9

Expenditures according to functional classification

Item Revised Budget2010-2011

General Public Services Sector 134436

Public Order and Safety Sector 18564

Economic Affairs Sector 23494

Environmental Protection Sector 1209

Housing and Community Amenities Sector 7846

Health Sector 18565

Recreation, Culture and Religion Sector 13764

Education Sector 46773

Social Protection Sector 104446

Other functional sectors 25397

Gross Total 394494

(Millions)

Budget balances2010/2011

Overall Deficit Operation Deficit Primary Deficit Cash Deficit

% of GDP Value % of

GDP Value % of GDP Value % of

GDP Value

7.7 105.5 6.5 89.2 1.8 25.2 8.3 113.8

Budget balances

Primary Deficit =Total

RevenuesTotal Expenditure

Interest payments

-

-

Cash Deficit =Total

RevenuesTotal

Expenses

-

Operation Deficit = -Total Revenues with Revenues available to Finance Investment

Total Expenses without

Investment.

Budget balances

Overall Deficit = Net borrowing + Net proceeds from

Privatization

Overall Deficit = +Cash deficitNet Acquisition

of Financial Assets.

Thank you!

Dr.Mohamed Zaky