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Copyright

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system
or transmitted in any form or by any means, or mechanical including photocopying, recording
or otherwise, without permission in writing from the National Institute Of Public
Administration, Lusaka, Zambia
National Institute of Public Administration Outreach Programmes Division

Acknowledgements
The National Institute Public Administration (NIPA), Outreach Programmes Division wishes to
thank those below for their contribution to this Public Finance module:

Mubiana M. (Mr.)

National Institute Of Public Administration


Outreach Programmes Division
P. O. Box 31990
Dunshanbe Road
Lusaka
Zambia
Phone No.: +260228802-4
Fax: +260227213
E-mail:Executivedirector@nipa.ac.zm
Website: www.nipa.ac.Zm
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National Institute of Public Administration Outreach Programmes Division

Content Page

About Public Finance.... 1


How this Public Finance Module is structured.. 1

Module Overview 1
Welcome to DPA Public Finance. 3
Module Learning Outcomes 3
Time frame.. 3
Study skills.. 3
Need help?.......................................................................................................... 5
Assignments 5
Assessments. 5

Getting around this Public Finance Module.. 6

Margin icons 6
Learning tips 7
Studying at a distance.. 8

Unit One Meaning and scope of Public Finance.... 9

Introduction .. 9
Definition of Finance. 9
Meaning and Scope of Public Finance.. 10
Historical Development of Public Finance 11
The theory of public finance.. 11
The distinction between public receipts and public revenue.. 13
Public Revenue.. 13
Summary... 15

Unit Two Risks of Public Finance. 16

Introduction.. 16
Risks of Finance 16
Measures to avoid financial risks 18
Summary. 18

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National Institute of Public Administration Outreach Programmes Division

Unit Three Analyzing the Income of the State.... 20

Introduction.... 20
National Income.... 20
Methods of Measuring National Income 21
Factors that Influence National Income 23
Difficulties in calculating National Income.. 23
Summary... 24

Unit Four Taxation....... 25

Introduction 25
Definition . 25
Functions of Taxation 25
Classifications of a good tax system. 26
Canons of taxes. 27
Division of tax burden. . 29
Incidence of taxes . 29
Direct and indirect taxes. 31
Value added tax (VAT). 33
Summary... 37

Unit Five The Budget... 39

Introduction 39
What is a budget.... 39
Importance of the budget in Zambia .... 39
Classification of the budget 39
The budget process in Zambia.. 41
The Appropriation Bill .. 43
Budget control (mechanism). 43
Auditing .... 46
The Auditor-Generals Office.... 47
Functions of the Auditor-General.. 47
Weaknesses of Auditor-General and Public Accounts committee. 48
The brief role of ministry of finance in national development.. 49
The core roles of ministry of finance 49
Summary... 56

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National Institute of Public Administration Outreach Programmes Division

Unit Six Analyzing National Expenditure............... 57

Introduction 57
Government expenditure.... 57
Public expenditure.. 59
Wagners law of increasing state activities.. 60
Wiseman Peacock hypothesis 61
Canons of expenditure.. 62
Government functions.. 63
Government revenue. 65
Summary.. 66

Unit Seven International Monetary Fund (IMF) 67


Introduction 67
Historical perspective. 67
Objectives...... 69
Sources of funds of international monetary fund.. 69
Criticisms of international monetary fund.... 70
Supporters of international monetary fund 71
The World Bank. 71
Public debt. 72
Public vs Private debt. 73
Public debt vs taxation... 74
Summary..... 75

Unit Eight The Economic Role of the State.. 76


Introduction 76
The difference between public and private goods. 78

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National Institute of Public Administration Outreach Programmes Division

Other considerations... 79
Summary.. 80

Unit Nine Government Fiscal and Monetary Policies. 81


Introduction... 81
Fiscal policy.. 81
Stabilization role of fiscal policies.. 81
Changes in the bank rates.. 82
Stabilization policies......... 84
Summary . 84

Recommended Readings. 85

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