Public Finance (Focus on State Budget)

Current and future sources of income. Household finance will therefore focus on allocating existing and future financial resources to current and future consumption needs in the most effective way. It includes activities of allocating income sources to consumption and savings needs, choosing assets to hold to minimize risks and match the consumption plans of individuals in the family.

Part of the household's financial resources are allocated for direct consumption (food, clothing, entertainment, education, medical treatment, etc.) in the consumer goods market, and part is reserved for future consumption. This reserve, if exploited and turned into investment capital for production and business, will strengthen the financial situation of other financial sectors.

In fact, most of the financial resources for business operations come from households. Moreover, the consumption plans of households also have a strong influence on the business operations of enterprises because, after all, households are the objects of service of enterprises. Therefore, household finance has an organic relationship with business finance.

3.2.3. Public finance (focus on State Budget)

The economic activities of the state include the provision of public services and macroeconomic regulation. Public finance will therefore not only focus on mobilizing resources to finance state activities or optimally allocating those resources for state spending purposes, but also must ensure that the state effectively performs its role as a macroeconomic regulator.

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The process of financial distribution through this department is as follows: The state budget's revenue is formed from taxes of enterprises and households; and from issuing bonds, borrowing and receiving foreign aid. At the same time, the state budget uses (distributes) its financial resources through regular expenditures and development investments of the Government.

The operation of the state budget has a great influence on the remaining financial sectors. On the one hand, the capital mobilization and expenditure policies of the state budget have a widespread influence on all subjects in the economy. On the other hand, the macroeconomic regulatory impact of the state budget is aimed at adjusting the behavior of subjects in the economy.

3.2.4. Intermediary finance

Intermediary financial institutions include: Commercial banks, insurance companies and other intermediary financial institutions that specialize in brokerage to turn temporarily idle financial resources in society into investment capital.

economic development

Due to their diverse and rich activities, financial institutions have the ability to compete with each other and complement each other, creating a huge potential source of capital for other financial sources in many diverse forms. We will look deeper in the section on financial intermediaries and financial markets.

3.2.5. Foreign finance

Currently, all areas of domestic financial activities (state budget, corporate finance, intermediary financial institutions, household finance) are directly related to foreign financial activities.

From a macro perspective, this is the relationship between national finance and international finance. This relationship will create a flow of capital from outside to supply capital for the economy. In the open economic conditions, we recognize that and apply it in attracting investment capital from abroad, to increase resources for the national economy.

When considering financial components and financial flows, we see that starting from the financial resources of production enterprises, the financial distribution process occurs through different flows and different financial components. The end point (transformation) of financial resources is their use for consumption purposes in the market of production materials and the market of consumer goods. That is the process of arising, developing, and changing financial relations.

The role and position of financial departments are the most important factors in the process of financial resources movement. Moreover, there is an interdependent relationship between those factors and it is the combination between them that forms a unified entity.

FURTHER READING

NATIONAL FINANCIAL POLICY

National financial policy is the sum of the viewpoints, objectives, and solutions that the state uses to create capital sources, mobilize, distribute, and use capital sources for the socio-economic development process. In essence, national financial policy is a policy to mobilize social resources in the form of value to effectively implement the country's goals.

Planning and implementing national financial policy is to set out financial guidelines, policies, directions and measures for a relatively long period of time. The scope of current national financial policy includes the following areas: state finance, corporate finance, and household finance.

1. GOAL OF NATIONAL FINANCIAL POLICY

1.1. Develop national financial policies to strengthen the country's financial potential

The content of the goal includes improving financial potential for the state and enterprises, optimizing the allocation of resources and improving their efficiency.

To achieve this goal, the national financial policy must introduce policies to unblock capital sources in the economy, create conditions for the state and enterprises to mobilize maximum domestic and foreign resources, promote economic growth to create accumulation for the economy, issue legal documents, encourage the establishment of organizations such as financial information companies, credit rating companies to make financial information transparent to improve the ability to monitor the effective use of financial resources.

1.2. Controlling inflation

Inflation not only erodes the effectiveness of economic growth but also distorts financial performance, leading to incorrect financial assessment and decision making. Therefore, controlling inflation and stabilizing the purchasing power of money will create conditions for sustainable economic growth and a healthy financial environment.

1.3. Job creation

Like all other macroeconomic policies, national financial policy must aim at creating jobs for people, reducing unemployment, thereby improving people's material and cultural life.

2. CONTENT OF NATIONAL FINANCIAL POLICY

2.1. Capital policy

- Capital is a prerequisite for maintaining and developing production, and at the same time is the basis for distributing profits and evaluating the effectiveness of economic activities; including material resources, assets in enterprises, cash resources or other assets reserved among the people.

- Capital creation policy must basically comply with the principle of benefiting the capital owner, the use of capital must comply with the principle of economic efficiency.

- The main goal of capital creation policy is to create an economic environment and legal premises to turn all monetary resources into profitable capital and increase the growth of social reproduction.

* Measure:

- Overcoming the situation of widespread capital provision, forcing enterprises to create their own financial strength and take legal responsibility to the capital source owner.

- Consistent and institutionalized multi-component economic development.

- Equitization of state-owned enterprises.

- Development of financial market economy.

- Have the right foreign economic strategy to attract foreign investment.

* The goal of capital policy is to preserve and use capital effectively.

* Methods of using state capital effectively:

- Convert state capital for basic construction into long-term bank credit.

- Identify key areas of state investment.

- Formation of public-private joint stock companies.

2.2. Financial policy for enterprises

Business development will effectively gather scattered resources. Financial policies for businesses include:

- Investment policy

- Preferential policies on taxes and expenses

- Enact laws to investigate monopoly and maintain fair competition.

2.3. Policy on state budget

- Arrange revenue sources, review expenses.

- End direct lending from the central bank to the state budget in all forms.

- The state budget deficit needs to be limited, moving towards balance of revenue and expenditure.

- Need to regularly innovate and improve mobilization forms, especially the system

Tax is not only a source of budget revenue but also a tool for macroeconomic regulation of the state.

2.4. Foreign financial policy

- Maximize foreign capital mobilization, create and maximize foreign currency revenue sources.

- Thoroughly attract capital from outside.

- Increase investment in developing export activities of goods and services.

- Imports are mainly for investment purposes.

- Has a reasonable price and rate system.

- Well manage the use of foreign currency, especially strong foreign currencies.

- Improve and simplify procedures.

- Create a favorable political, legal and economic environment.

2.5. Monetary and credit policy

The goal of national monetary policy is to strictly control inflation, stabilize currency prices, and facilitate capital mobilization.

This policy includes:

- Manage the money supply.

- Credit policy:

+ Bank credit needs to be expanded to effectively meet capital needs with the motto of not allowing highly effective investment projects to lack capital.

+ Increase medium and long-term lending.

+ Reduce overdue debt and bad debt ratio.

REVIEW QUESTIONS

1. Describe the birth and nature of money.

2. Analyze the functions of money.

3. Among the basic functions of money, which function best reflects the nature of money? Why?

4. Money is not the best store of value, but why do people still want to hold money?

5. Describe the development process of currency forms.

6. Describe currency blocs and monetary regimes.

7. Describe the origin and nature of finance.

8. Functions of finance and the relationship between those functions.

9. Describe the role of the financial system in the economic development of each country.

10. Describe the components of the financial system and the relationships between the components. Give examples.

CHAPTER 2: STATE BUDGET

1. CONCEPT AND NATURE OF STATE BUDGET

The state budget was born with the emergence of the state. The state, through its political power and financial needs to ensure the implementation of its functions and tasks, has set out the revenues and expenditures of the state budget. This shows that the existence of the state and the role of the state in socio-economic life are the basic factors that determine the existence and operation of the state budget.

In reality, the state budget's activities are manifested in various forms of state revenues and expenditures in various fields of socio-economic activities. These revenues and expenditures are summarized in a financial revenue and expenditure budget table implemented within a certain period of time. The compulsory revenues of the state budget are a part of the main financial resources created through the distribution of national income created in the production and business sector and the main expenditures of the budget are of a grant nature serving development investment and social consumption. Thus, in terms of form, it can be understood that the state budget is all state revenues and expenditures included in the budget, approved by competent state agencies and implemented within a year to ensure the implementation of the functions and tasks of the state.

However, the operation of the state budget (NSNN) is the activity of distributing social financial resources associated with the formation and use of a centralized monetary fund, the state budget. In the process of distribution, financial relations have arisen between the state on one side and social entities on the other. These financial relations include:

- Economic relations between the State budget and enterprises: These economic relations arise in the process of forming budget revenue in the form of taxes that enterprises must pay. At the same time, the budget supports the development of enterprises in the form of infrastructure construction, capital support, etc.

- Economic relations between the State budget and administrative units: This relationship arises in the process of redistributing income by the State budget providing funds to State management units. At the same time, in the market economy mechanism, units with public service activities have fees and charges, this source of revenue partly fulfills the financial obligations of the units to the budget, partly covers their expenditures to reduce the burden on the budget.

- Economic relationship between the State budget and the population: This relationship is shown through the fact that a part of the population fulfills its financial obligations to the state by

paying taxes, fees, and charges. Another segment of the population receives subsidies from the state budget according to prescribed policies.

- Economic relationship between the State budget and the financial market: This relationship arises when the State participates in the financial market by issuing State Treasury securities to mobilize capital from social entities to meet the capital balance requirements of the State budget.

Thus, behind the external manifestation of the state budget as a monetary fund with its revenues and expenditures, the state budget reflects economic relations in the distribution process. From the above analysis, it can be seen that the state budget is a system of economic relations arising in the process of distributing social financial resources to create and use the state's centralized monetary fund to perform the functions and tasks of the state.

2. ROLE OF STATE BUDGET

In a market economy, the role of the state budget has changed and become extremely important. In the macro management of the national economy, the state budget has the following roles:

2.1. Mobilizing financial resources to ensure the State's spending needs

This role comes from the economic nature of the state budget, to ensure the activities of the state in the political, economic and social fields, it requires certain financial resources. These financial resources are formed from tax revenues and non-tax revenues. This is the historical role of the state budget that in any social regime, any economic mechanism, the state budget must perform.

2.2. Tools for market regulation, price stabilization and anti-inflation

The outstanding feature of a market economy is the competition between businesses to achieve maximum profits. The basic factors of the market are supply and demand and prices, which constantly interact and govern market operations. The imbalance between supply and demand will cause prices to increase or decrease suddenly and cause fluctuations in the market, leading to the shift of capital from businesses from one industry to another, from one locality to another. The massive shift of capital will negatively impact the economic structure, and the economy will develop unbalanced. Therefore, to ensure the interests of both producers and consumers, the state must use the budget to intervene in the market to stabilize prices through tax tools and state budget expenditures in the forms of capital funding, subsidies and the use of commodity reserves and financial reserves. At the same time, in the process of adjusting