Centralized finance

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:43

Centralized finance is the relationship that arises in the state in the process of formation, distribution and use of trust funds. This type of finance (if we consider it as a set of funds), as a rule, is first accumulated in the state accounts of the central bank of the country, and then distributed to the budget and extra-budgetary funds.

They contribute to the realization of the main goal that the state seeks to achieve, the financing of basic socio-economic programs, the provision of the state apparatus of government and the military reserve of the country. The financial system of any country includes a centralized and decentralized sector. The latter assumes the presence of financial relations that develop in the process of interaction between various economic entities.

As noted above, centralized finances form a set of relations regarding the accumulation and disposal of funds in the municipal andpublic sector. The basis of such relationships is cash flow - a single process that connects non-cash and cash flow of funds, ensuring the satisfaction of the requirements and obligations of counterparties. In other words: thanks to them, an expanded reproductive process is carried out. Centralized finance is closely related to decentralized finance. Thus, the state of the budget and the amount of funds received by the treasury largely depend on the activities of individual enterprises and the development of individual sectors of the economy.

Centralized and decentralized finance perform the same functions.

Planning for fundamental goals that are of paramount importance for the country's economy. Establishing the main guidelines is of great importance for the further activities of both individual enterprises and state bodies. If we talk about the centralized sphere, then the performance of this function is manifested in the approval of annual budgets and planned balances.

The organizational function implies a clear structure, each element of which is endowed with special powers and responsibilities. And to facilitate and streamline the activities of each structural element, that is, a body authorized by the state, a clear classification of budgets has been developed, which significantly speeds up the process of distributing finances.

Centralized finance has a stimulating function. It manifests itself inredistribution of funds to needier enterprises and organizations in order to maintain a strategically important economic sector.

Besides, state bodies exercise control over the activities of all elements of the economic system and determine the degree of their compliance with established criteria, norms and standards. The controlling function determines the development and approval of a whole set of legislative acts and administrative and legal norms. The dominant position is occupied by control over the targeted use of funds received from the budget. Thus, centralized finance is subject to tight supervision.