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, ie. 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.

Public funding

Public funding is a particular category of funds occurring in the state economy. Public funds can be used only on:

  • financing of public expenditure,
  • financing expenses the State budget or the budgets of local government.


  • Barrios, S., & Schaechter, A. (2008). The quality of public finances and economic growth (No. 337). Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  • Rhodes, R. A. (2000). Governance and public administration. Debating governance: authority, steering and democracy. Oxford: Oxford University Press.