CHAPTER ONEINTRODUCTION1.1 Background to the StudyGovernment expenditures play key roles in the operation of all economies. It refers to expenses incurred by the government for the maintenance of itself and provision of public goods, services and works needed to foster or promote economic growth and improve the welfare of people in the society. Government (public) expenditures are generally categorized into expenditures on administration, defense, internal securities, health, education, foreign affairs, etc. and has both capital and recurrent components.Capital expenditure refers to the amount spent in the acquisition of fixed (productive) assets (whose useful life extends beyond the accounting or fiscal year), as well as expenditure incurred in the upgrade/improvement of existing fixed assets such as lands, building, roads, machines and equipment, etc., including intangible assets. Expenditure in research also falls within this component of government expenditure. Capital expenditure is usually seen as expenditure creating future benefits, as there could be some lags between when it is incurred and when it takes effect on the economy. Recurrent expenditure on the other hand refers to expenditure on purchase of goods and services, wages and salaries, operations as well as current grants and subsidies (usually classified as transfer payments). Recurrent expenditure, excluding transfer payments, is also referred to as government final consumption expenditure. The annual budget spells out the direction of the expected expenditure, as it contains details of the proposed expenditure for each year, though the actual expenditures may differ from the budget figures due, for example, to extra-budgetary expenditures or allocations during the course of the fiscal year. Government expenditure is a major component of national income as seen in the expenditure