The Scope of Government That PFM Covers
Two broad branches of the public sector
1. General Government, which includes:
- Central Government — further split into budgetary central government, social security funds, and extrabudgetary central government funds
- State / regional governments
- Local governments
2. Public Corporations, which includes:
- Public non-financial corporations (state-owned enterprises engaged in commercial activity)
- Public financial corporations
The “wider public sector”
Put the two branches together and you get the wider public sector: General Government plus Public Corporations. This is the broadest possible definition of “government” that PFM systems need to be able to see and manage.
A state-owned electricity company runs large losses that the government quietly covers every year, but this never appears in the annual budget document. Under the 'wider public sector' concept, is this government's business?
Public corporations (like state-owned enterprises) are part of the wider public sector alongside General Government. Their losses are a real fiscal risk even though they sit outside the core annual budget — which is exactly why PFM needs to cover more than just the budget document.
Key takeaways
- PFM's scope extends far beyond the annual budget document alone.
- General Government = Central + State/Regional + Local governments (plus extrabudgetary funds).
- Public Corporations = public non-financial + public financial corporations (state-owned enterprises).
- Wider public sector = General Government + Public Corporations — the broadest definition PFM has to manage.
- A narrow focus on just the core budget leaves large areas of public money less controlled.
Frequently asked questions
What's the difference between General Government and Public Corporations?
General Government carries out core government functions (administration, policy, services) funded mainly through taxes. Public Corporations engage in commercial activity — like a state-owned bank or utility — and may earn their own revenue, but remain government-owned.
Why do extrabudgetary funds matter for PFM?
Because they hold and spend government money outside the main annual budget process. If PFM only tracks the core budget, these funds become a blind spot — exactly the kind of gap that can let fiscal risk build up unseen.
Is a public university a Public Corporation?
It depends on classification — but generally, entities primarily funded by the budget and delivering non-commercial public services sit within General Government, while commercially-operating, revenue-earning entities sit within Public Corporations.
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