Public Financial Management (PFM)
Public Financial Management (PFM)
Public Financial Management (PFM)
March 6, 2021
a. Monopoly/Oligopoly - Regulation
b. Externality- Regulation
-Spillover or third party effect; unpriced cost or benefit that an indl or firm produces to a
third party; it leads to inefficiency of allocation of resources
To address externalities- direct nego/bargaining/taxation/allocative policy thru regulation/
balance between regu and taxation
c. Imperfect Information -regu/legislation
d. Incomplete Markets- regu /distru/ legislation
e. Income Equality- regu distri/legisltion
f. Emerging Issues – Changing conditions- regu/ innovations
1. Tax Policy -
2. Expenditure Policy-
Expansionary Policy :
When we decrease the taxes and Increase in expenditures (budget deficit)
Contractionary Policy :
When we increase in taxes and decrease in expenditures (budget surplus)
Monetary policy is administered by the Bangko Sentral ng Pilipinas (BSP).
It has three (3) principal instruments:
1. Reserve requirement 2. Discount rate 3. Open market operation
Balance of Payment (BoP) Disequilibrium All economic transactions between households, firms,
and government agencies in a country against the rest of the world during a given period of time
Imbalances in current and capital accounts
Taxation System
“The rule of taxation shall be uniform and equitable. The Congress shall evolve a
progressive system of taxation.
(Article VI, Section 28, paragraph 1, Philippine Constitution)
b. Vertical Equity A tax system treats individuals with unequal incomes differently.
3. Flexibility
a. Ability to expand tax base
b. Ability to raise taxes
c. Ability to find new sources of revenue
d. Must have substantial degree of stability
3. Simplicity
a. Laws and guidelines are easy to understand b. Easy enforceability with
economical costs c. Transparency d. Convenience in timing and manner of
collection.
4. Feasibility
a. Must be supported by stakeholders
b. Must undergo the consultation process with stakeholders (information and
engagement)
c. Government must earn the trust of the public.
- Strengthening accountability
- Instituting reforms
- Ensuring equity and fairness
d. Covers information security
Besides revenue from taxation , Government can source financing from Borrowings :
National Government Debt - Borrowings refer to funds obtained from repayable sources, such
as loans secured by the government from financial institutions and other sources, both domestic
and foreign, to finance various development projects and/or budget support.
Borrowings can be : Domestic Borrowings Foreign Borrowings
Why does the government borrow? The government borrows for any of the following reasons:
• to finance national government deficits; • to obtain foreign exchange; • to secure financing at
more favorable terms than the opportunity cost of revenues; • to take advantage of benefits
attached to the funds, e.g. technology; and, • to balance the timing of resources with the project
gestation and repayment of benefit
3. Commodity Loans - These are foreign loans in the form of goods received which are
subsequently monetized to finance programs and projects of implementing agencies.
4. Constructive Cash Receipts- A funding source corresponding to proceeds from foreign
loans / grants in the form of goods and services for which no cash is remitted to the
National Treasury.
5. Dividends- These are the declaration by GOCCs and remittance of their annual net
earnings as cash, stock or property dividends to the national government, at rates
prescribed by law.
6. Equity- These are national government investments in the authorized capital stock of
GOCCs.
7. Extraordinary Income- These are collections derived from the repayment of loans and
advances made by the government as well as from other non-recurring sources.
8. Extraordinary Receipts These are income which do not regularly accrue to the
government, the collection, for which is indefinite or does not depend entirely on the
authority of the government.
9. Grants These are all non-repayable transfers received from other levels of government, or
from private individuals, or institutions, foreign or domestic, including reparations and
gifts given for particular projects or programs or for general budget support.
10. Official Development Assistance (ODA) T-his refers to the financial and non-financial
grants and concessional loans to developing countries provided by bilateral and
multilateral institutions, including state and local governments or their executive
agencies.