Public finances

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Public finances include the activities and processes of collecting, and distribution of cash, which are at the disposal of the public authorities. Money mainly come from the public tributes, assets, and income from public feedback, i.e. credits, loans and securities. Public funds are used for financing public aims and tasks. Public finances are divided into state finances, finance of local government, finance of social security system.

Functions of public finances

The basic functions of public finances:

  • Allocation function - public finances are a tool for allocation of resources - to provide public goods and services financed from public funds.
  • Redistribution function - state to incur expenses for goods site must have financial resources. State does not directly produce any income. Therefore, authority of the State, is used in redistribution of income (in the form of money) by transfer between various units.
  • Stabilization function - is used for easing effects that arise as a result of the implementation of allocation and redistribution functions of public finances. Is used to mitigate fluctuations in the business cycle by means of appropriate instruments.

Benefits and limitations of public funding

Public funding can take many forms, including grants, subsidies, and loans. Some of the benefits and limitations of public funding include:


  • Support for important initiatives: Public funding can support programs and initiatives that are deemed important for the public good, such as education, healthcare, and infrastructure development.
  • Stimulation of economic growth: Public funding can stimulate economic growth by supporting business and job creation, as well as by investing in infrastructure and other economic development initiatives.
  • Access to services for marginalized communities: Public funding can help ensure access to essential services for marginalized communities that may not be able to afford them otherwise.
  • Transparency and accountability: Public funding is often subject to government oversight and regulations, which can increase transparency and accountability in how the funds are used.


  • Limited resources: Public funding is limited by the resources available to the government and may not be sufficient to fully support all programs and initiatives.
  • Bureaucratic obstacles: The process of obtaining public funding can be complex and bureaucratic, which can make it difficult for organizations to navigate.
  • Political influences: Public funding decisions can be influenced by political considerations and may not always be based on objective criteria.
  • Dependence on government decisions: Organizations that rely on public funding can be vulnerable to changes in government priorities or budget cuts that can affect the continuation of their programs or initiatives.
  • Limited to certain areas: Public funding may be limited to certain geographic areas or sectors, and may not be available for all organizations or initiatives.

Overall, public funding can provide important resources to support programs and initiatives that are deemed important for the public good, but it also has its limitations as it depends on government decisions and budget availability which can change over time.

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