Purpose of public finance

Business studies study module
  • Provision of essential goods and services. The government has a responsibility of providing its citizens with essential goods and services such as security,health,schools,drought control, law e.t.c such facilities and services may not be adequately covered by the private sector because of the high costs involved and risks.
  • Encouraging consumption of certain commodities-The government may encourage consumption of certain commodities e.g. maize by subsidizing on their productions or lowering their taxes.
  • Controlling consumption of certain commodities-The government may also encourage consumption of some commodities e.g. cigarettes and alcohol by imposing heavy taxes on them.
  • Promotion of Balanced regional development-This may be done by initiating economic projects in areas that are under developed/lagging behind.
  • Wealth Redistribution-This is done by heavily taxing the rich and using the money raised to provide goods and services that benefit the poor
  • To promote economic stability-Economic instability may be caused by factors such as unemployment. Such problems can be solved through public expenditure in projects that generate employment such as ‘kazi kwa vijana’
  • Creation of a conducive Business Environment-Through public expenditure, the government may develop infrastructure such as roads, electricity, security e.t.c thereby creating a conducive environment for businesses to thrive in.
  • To raise government revenue-Through public finance, the government raises revenue which it uses in provision of essential goods and services to the public.
  • Improving balance of payment-This may be done by improving heavy taxes such as customs duty to discourage importation

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