Fiscal Management – where do we raise our budget?

How do we spend such revenue for the

state to function
 Fiscal management involves managing financial resources to achieve an organization's
goals. It includes budgeting, accounting, financial reporting, risk management, and
decision-making. Effective fiscal management ensures resources are used efficiently and
transparently, leading to financial stability and long-term success.
 Fiscal administration is about collecting something from the constituents (people of the
state) and spending it also for the constituents – tax, income and borrowings
 So simply said, fiscal administration is the act of managing incoming and outgoing
monetary transactions and budgets for governments, educational institutions, and other
public entities.
 Public finance borrow liberally from the tools and concepts of business finance, but these
are not always used in the same way and often not for the same reason.

o governments may tax to enlarge their resources;

o “ownership” of the government is not clear because many stakeholders share a
legitimate interest in government decisions; and
o the value of government services is neither easy to quantify nor reflected in a
single measure (like the sales or profits of a business enterprise)
o Governments similarly provide goods and services that are valued by the
community but the nature of these goods and services is such that the
government cannot capture any of that value in a voluntary sales transaction.
Timeline and History
 Ancient civilizations - The ancient civilizations of Mesopotamia, Egypt, and Greece
developed early forms of fiscal management to support their governments and fund
public projects. For example, in ancient Greece, the city-states developed systems of
taxation and public finance to support their military and naval campaigns, as well as
public works projects like roads, aqueducts, and buildings. Key proponents of this
approach included philosophers like Aristotle, who wrote about the importance of
taxation and public finance in the ideal society.
 Aristotle argues that taxation is necessary for the functioning of the state, but he also
emphasizes the need for fairness in the distribution of the tax burden. He believed that
taxes should be proportionate to one's wealth and that the wealthy should bear a
greater burden than the poor. He argues that the state should intervene in the economy
to ensure that resources are distributed fairly and that citizens have access to the basic
necessities of life. He also stresses the importance of public works projects and the need
for the state to invest in infrastructure to improve the lives of its citizens.
 17th century: French economist Jean-Baptiste Colbert implements fiscal reforms in
France, including a centralized system of tax collection and state-run manufacturing
industries.

Private Finance vs. Public Finance
In summary, public finance and private finance share several similarities, including financial
decision-making, financial analysis and forecasting, the use of financial tools and techniques,
financial accountability, and the impact of economic conditions.
In summary, while public finance and private finance share some similarities, they differ
in their sources of revenue and expenditure, objectives, budgeting process, financial risks,
and regulatory environment. Public finance is subject to more regulations and public
scrutiny due to the use of taxpayer funds and the provision of public goods and services.

Components
1. Public Revenue – this component refers to the various sources of revenue available to
governments such as taxes, fees and grants, even borrowing. (Taxes and Non-taxes
revenue).
 Revenue = cash flow which does not increase the liability of the government
2. Public Expenditure – it is a critical component of public finance and is intended to
promote the well-being of citizens, enhance economic growth and development, and
ensure the smooth functioning of government operations.
3. Debt Management - Governments may borrow funds from various sources, including
domestic and foreign investors, and use the funds to finance various public expenditures,
such as infrastructure projects, social programs, and debt servicing costs
4. Budgeting – diria na ma apply ang Fiscal planning, sectoral planning, regional planning,
project planning, short-term planning and long term planning
5. Accounting and Financial Reporting - Accounting and financial reporting are important
components of fiscal administration, as they involve the collection, analysis, and
dissemination of financial information related to the government's revenue, expenditures,
assets, and liabilities. Effective accounting and financial reporting are essential for
ensuring transparency, accountability, and good governance in public finances. It helps to
ensure that the government's financial activities are properly documented and reported,
and that financial information is readily available to stakeholders for decision-making
and evaluation purposes.
6. Financial Management - This component involves managing government resources
effectively to achieve the best possible outcomes. It includes financial planning, analysis,
risk management, and the efficient use of financial resources.
 Financial Reporting: Financial reporting involves the preparation and
dissemination of financial information to stakeholders. Its primary purpose
is to provide relevant and reliable information on the organization's
financial position and performance. The key concepts in financial reporting
include financial statements, notes to the financial statements, and
 management's discussion and analysis (MD&A). Best practices in financial
reporting involve adhering to accounting standards and regulations,
presenting information clearly and transparently, and providing timely and
accurate financial reporting.
 Financial Analysis: Financial analysis involves interpreting financial
information to make informed decisions and recommendations. Its primary
purpose is to evaluate an organization's financial performance and position
and identify areas for improvement. The key concepts in financial analysis
include ratio analysis, trend analysis, and benchmarking. Best practices in
financial analysis involve using multiple methods of analysis, comparing
results to industry benchmarks, considering qualitative factors in addition to
quantitative factors, and making informed recommendations based on
analysis.

IMPORTANCE OF PUBLIC FISCAL ADMINISTRATION

1. Economic stability: Effective public fiscal administration is important for promoting
economic stability. This includes implementing sound macroeconomic policies, such as
maintaining a stable and predictable fiscal environment, avoiding large deficits, and
managing public debt. By promoting economic stability, governments can create an
environment that is conducive to economic growth and job creation, which can in turn
reduce poverty and improve living standards.
2. Inter-governmental relations: Public fiscal administration plays an important role in
managing the relationships between different levels of government. This includes
ensuring that resources are allocated fairly and efficiently between different levels of
government, and that policies and programs are coordinated across different levels.
Effective inter-governmental relations can help avoid duplication of efforts and promote
efficient and effective service delivery.
3. Risk management: Public fiscal administration helps governments identify and manage
financial risks. This includes identifying sources of revenue volatility and taking steps to
manage them, such as by building up reserves or diversifying revenue sources. Effective
risk management can help governments avoid fiscal crises and maintain fiscal
sustainability.
4. Public sector performance: Effective public fiscal administration is critical for achieving
good performance in the public sector. This includes ensuring that resources are allocated
efficiently and effectively, and that public goods and services are delivered in a timely
and cost-effective manner. By promoting good performance in the public sector, public
fiscal administration can help ensure that citizens receive high-quality services and that
government operates effectively and efficiently.
5. International cooperation: Public fiscal administration is increasingly important in the
context of globalization and international cooperation. This includes ensuring that
 governments meet international financial reporting standards and promoting transparency
and accountability in international financial transactions. Effective international
cooperation on public fiscal administration can help promote economic growth and
development, and can help ensure that resources are allocated in a fair and efficient
manner.
In summary, effective public fiscal administration is important for promoting economic stability,
managing inter-governmental relations, managing financial risks, promoting good public sector
performance, and promoting international cooperation. By ensuring that resources are allocated
efficiently and effectively, public fiscal administration can help governments achieve their policy
objectives and maintain public trust and confidence.

ROLE OF GOVERNMENT IN FISCAL PLANNING AND ADMINISTRATION

 The government plays a critical role in fiscal planning and administration by establishing
policies and regulations that guide the use and allocation of public resources. Fiscal
policies are used to promote economic stability, manage public finances, and ensure that
public resources are used effectively and efficiently. Fiscal regulations, on the other hand,
provide guidelines on how public finances should be managed, ensuring transparency and
accountability in the use of public resources.

Fiscal policy refers to the government's use of spending, taxation, and borrowing to
influence the economy. It is typically used to stabilize the economy, achieve full
employment, and control inflation. Fiscal policy decisions are made by the government or its
appointed agencies, and they are usually made in response to economic conditions.
Fiscal regulation refers to government rules and laws that govern how fiscal policy is
implemented. Fiscal regulation includes laws that control government spending, taxation,
borrowing, and debt management. It also covers regulations related to government
procurement, accounting, and financial reporting.
In summary, fiscal policy is about making decisions on government spending and revenue to
influence the economy, while fiscal regulation is about setting rules and laws to govern how
those decisions are implemented.
Examples: Fiscal Policy:
Stimulus Packages: The Philippine government has implemented several stimulus packages in
response to the COVID-19 pandemic. These packages include cash assistance programs,
subsidies for affected businesses, and infrastructure spending.
Taxation: The government adjusts tax rates and brackets to manage revenue and encourage or
discourage certain economic activities. For example, tax incentives are given to companies that
invest in certain industries or regions.
 Public Investment: The government can invest in public infrastructure projects such as roads,
bridges, and public buildings to stimulate the economy and create jobs.
Fiscal Regulations:
The National Budget: The Philippine government follows a budgeting process that is governed by
laws and regulations. The Budget Reform Act of 2019 provides guidelines for the preparation,
authorization, and execution of the national budget.
Procurement Regulations: Government procurement is governed by the Government
Procurement Reform Act, which aims to ensure transparency, competitiveness, and efficiency in
the procurement process.
Debt Management: The Philippines has a debt management policy that guides borrowing and
debt repayment. This policy is implemented by the Bureau of the Treasury, which is responsible
for managing the country's debt portfolio.

Central Banks - The establishment of these institutions is crucial in promoting economic growth
and stability, as they provide a framework for the effective management of public resources and
ensure that financial systems operate efficiently and transparently. Furthermore, governments are
also responsible for ensuring that fiscal planning and administration are carried out in an ethical
and transparent manner, with a focus on promoting the public interest and avoiding conflicts of
interest.
Overall, the role of the government in fiscal planning and administration is to ensure the
effective and efficient management of public resources, promote economic stability and growth,
and protect the public interest. The development of fiscal policies and regulations, as well as the
establishment of institutions such as central banks and financial regulators, are key components
of this role.
Visualization:
The first component of the government's role in fiscal planning and administration
is the development of fiscal policies and regulations. These policies and regulations guide the use
and allocation of public resources and ensure transparency and accountability in the management
of public finances. This component is represented by the first box labeled "Fiscal Policies and
Regulations."
The second component of the government's role is the establishment of central banks. Central
banks are responsible for managing monetary policy, controlling the supply of money and credit
to promote economic growth and stability. This component is represented by the second box
labeled "Central Banks."
The third component of the government's role is the establishment of financial regulators.
Financial regulators oversee financial institutions and markets to ensure their stability and protect
consumers. This component is represented by the third box labeled "Financial Regulators."
All three components of the government's role are connected by arrows pointing downward to a
horizontal line labeled "Effective and Efficient Management of Public Resources." This line
represents the government's responsibility to ensure the proper use and allocation of public
resources.
At the bottom of the diagram is a box labeled "Promote Economic Stability and Growth, and
Protect the Public Interest." This box represents the overarching goal of the government's role in
fiscal planning and administration, which is to promote economic stability and growth while
protecting the public interest.

FISCAL PLANNING

 Goal setting: Fiscal planning begins with setting clear and measurable financial goals,
such as balancing the budget, reducing the deficit, or increasing revenue. These goals
should be based on a thorough analysis of the organization's financial situation and
priorities.
 Revenue forecasting: Fiscal planning requires accurate forecasting of revenue streams,
such as taxes, fees, and grants. This involves analyzing economic trends, demographic
data, and past revenue performance to project future revenue levels.
 Expenditure forecasting: Fiscal planning also requires accurate forecasting of expenditure
levels for government programs and services. This involves analyzing programmatic
data, demographic data, and historical expenditure levels to project future spending
needs.
 Budget development: Fiscal planning involves developing a budget that aligns with the
organization's financial goals and revenue and expenditure forecasts. The budget should
be based on a thorough analysis of the costs and benefits of government programs and
services.
 Monitoring and evaluation: Fiscal planning also requires ongoing monitoring and
evaluation of the organization's financial performance. This involves tracking revenue
and expenditure levels, comparing actual performance to forecasted performance, and
making adjustments as needed to ensure financial sustainability and effectiveness.
In summary, fiscal planning is an essential component of fiscal administration that involves
setting financial goals, forecasting revenue and expenditure levels, developing a budget, and
monitoring and evaluating financial performance. By engaging in fiscal planning,
 governments can ensure that their programs and services are financially sustainable and
effective in achieving their objectives.

KEYNESHIAN ECONOMICS
Keynesian economics is highly relevant to the study of fiscal planning and management, as it
provides a framework for understanding the role of government in managing the economy and
promoting economic growth.
One of the central ideas of Keynesian economics is that during periods of economic downturns
or recessions, government intervention is necessary to boost aggregate demand and stimulate
economic growth. This can take the form of increased government spending, tax cuts, or
monetary policy interventions by the central bank. Fiscal planning and management involves
making decisions about government spending and taxation policies, so an understanding of
Keynesian economics is essential for designing effective policies that can promote economic
growth and stability.
Additionally, Keynesian economics emphasizes the importance of using fiscal policy to stabilize
the economy over the business cycle, which involves managing government revenues and
expenditures in a counter-cyclical manner. This means that during periods of economic growth,
governments should aim to balance their budgets or even run surpluses, while during periods of
recession, governments may need to run deficits to stimulate demand and promote economic
growth.
Overall, an understanding of Keynesian economics is essential for policymakers and fiscal
managers who want to design and implement effective fiscal policies that can promote economic
growth, stability, and prosperity.

CONCEPT OF THE THEORY

Keynesian economics is a macroeconomic theory that emphasizes the importance of government
intervention in managing the economy and promoting economic growth. This theory is highly
relevant to the study of fiscal planning and management, as it provides a framework for
understanding how government spending and taxation policies can be used to stabilize the
economy over the business cycle.
Fiscal planning and management involves making decisions about how governments should
allocate their resources and manage their finances to achieve their economic objectives. An
understanding of Keynesian economics is crucial for designing effective fiscal policies that can
promote economic growth, stability, and prosperity.
Keynesian economics argues that during periods of economic downturns or recessions,
governments should increase their spending and reduce taxes to boost aggregate demand and
stimulate economic activity. This can help to prevent or mitigate the negative effects of
recessions, such as high unemployment and low economic growth.
Furthermore, Keynesian economics suggests that fiscal policy should be used in a counter-
cyclical manner, meaning that during periods of economic growth, governments should aim to
balance their budgets or even run surpluses, while during periods of recession, governments may
need to run deficits to stimulate demand and promote economic growth.
This means that according to Keynesian economics, the level of economic activity and
employment in an economy is largely determined by the amount of total spending by
consumers, businesses, and governments. If there is a lack of demand for goods and services, it
can lead to reduced economic output and high unemployment. During a recession, when the
economy is operating below its potential level of output, Keynesians believe that government
intervention is necessary to boost demand and increase economic activity, which can help
reduce unemployment and improve overall economic performance.

The legislation of fiscal administration in the Philippines primarily consists of the following
laws:
National Internal Revenue Code (NIRC) - This law governs the collection of taxes and other
revenues by the Bureau of Internal Revenue (BIR).
Tariff and Customs Code of the Philippines (TCCP) - This law governs the imposition and
collection of duties, taxes, and other charges on imports and exports by the Bureau of Customs
(BOC).
General Appropriations Act (GAA) - This law is the annual budget of the government that
provides for the allocation and use of public funds.
Local Government Code (LGC) - This law devolves certain fiscal and administrative powers and
responsibilities from the national government to local government units (LGUs).
Government Procurement Reform Act (GPRA) - This law governs the procurement of goods,
services, and infrastructure projects by government agencies.
Anti-Money Laundering Act (AMLA) - This law aims to prevent and suppress money laundering
activities in the Philippines.
Foreign Currency Deposit Act (FCDA) - This law provides for the confidentiality of foreign
currency deposits and investments in the Philippines.
These laws are enforced by various government agencies such as the BIR, BOC, Department of
Budget and Management (DBM), and Commission on Audit (COA), among others.