ABSTRACT
This chapter analyses the way in which the poor financial performance of public enterprises have consequences for the public exchequer. Continuing deficits of public enterprises have the almost automatic consequence of making unavailable to the government the expected interest and dividend receipts. The government will have to devise ways of bridging the budget gap – through taxation, primarily. Assume that the interest and dividend incomes expected of public enterprises are represented by Id. The upward slope of the curve is a function of two factors: increased investments over time and profit expectations at increasing rates. Many developing countries present a paradox in the context of their public enterprise finances. They are in need of mobilising savings as far as possible in the interest of their development programmes. A major part of their development expenditures has gone as public enterprise investments whose role in the savings effort should, therefore, be high.
