Public expenditure refers to the amount of money spent or used by a government to be able to finance its activities.  Annually the national, state, and local governments formulate a budget to determine how much money they are going to spend, and to what items these public funds are to be allocated into, during the coming fiscal year.  The budget is the documented declaration of the government’s decision on expenditure, and determines which public goods to produce, which market externalities to address, and how much will be provided for income distribution.

Public expenditure is always controversial, because of the existence of various sectors or social groups which demand different things.  More often than not, public expenditure is a translation of the current or future impetus of a government, especially when bulk of the government’s spending patterns and willingness to spend – as shown in the national budget – become highlights of political analysis.  Before a budget is drafted for initial reading, lobbyists of various kinds of demands put continuous pressure, and the same is true during the rest of the budget enactment process; these demands exhibit conflicting interests most of the time, adding to the difficulty of budget formulation.  After the budget is passed as a law, a great deal of efforts and time are then being spent to analyze and determine whether the public funds meant for every kind of expenditure is actually and efficiently used for such expenditure item.

Public expenditure also forms a major issue in public office accountability.  The use of public funds for things they are not meant for – usually personal interests of the public official directly in charge – is punishable by law, in grave terms, in all countries worldwide.