Public Expenditures

Public expenditures refer to the monetary outlays made by the state and other public legal entities to meet public needs and achieve economic and social objectives. In a narrow sense, public expenditures consist solely of payments made by the state and other public legal entities through their budgets. In a broad sense, public expenditures encompass all costs of activities carried out by the state and other public institutions, expenditures of economic public enterprises, social security payments, tax exemptions and exceptions, and contributions made by private individuals to public institutions. Pursuant to Law No. 5018 on Public Financial Management and Control, public expenditure includes expenditures incurred for activities carried out under legal authority, purchases of goods and services, social security contributions, debt interest payments, general borrowing expenses, economic, financial and social transfers, donations and aid, and other expenses.

Purposes and Functions of Public Expenditures

The primary purposes of public expenditures are to meet collective needs, correct income distribution, ensure economic stability, and support economic growth. Economically, public expenditures directly affect consumption, investment, production, resource allocation, and national income. Socially, they regulate income distribution and provide services such as education, health care, and social security.

Legal and Theoretical Approaches

Approaches to public expenditures differ between classical and modern fiscal theorists. Classical fiscal theorists advocate keeping public expenditures as low as possible, focusing on their volume, and restricting inefficient spending. Modern fiscal theorists, by contrast, are more concerned with the content, distribution, and social benefit of expenditures rather than their quantity. Within the modern understanding, public expenditures are viewed as one of the state’s financial instruments and are planned within the framework of social state principles.

Types of Public Expenditures

• Current Expenditures: These are expenditures made to sustain ongoing public services, such as personnel costs and purchases of goods and services. Current expenditures directed toward areas such as national education, health care, and social security contribute to the development of human capital.
• Investment Expenditures: These are expenditures made to build capital stock, increase production capacity, and create employment. They include purchases of machinery and equipment, construction of buildings and facilities, and major repair costs.
• Transfer Expenditures: These are payments made without any direct exchange of goods or services, resulting only in the transfer of wealth. Domestic and foreign debt interest payments, social security payments, tax refunds, and transfers to state-owned enterprises fall into this category.

Economic Classification

Economically, public expenditures are divided into two main categories:

• Real (Actual) Expenditures: Expenditures made in exchange for goods and services, encompassing both current and investment expenditures.
• Transfer Expenditures: Payments made without any exchange of goods or services.

In addition, according to analytical budget classification, public expenditures are categorized based on institutional, functional, financing type, and economic criteria.