🏛️
BUDGET
SYSTEM &
STRUCTURE
Principles · Levels · Classification
Source: Vahobov A.V. & Malikov T.S. — Finance (Chapter 18)
Budget System
Budget Structure
Classification
Uzbekistan
Table of Contents
Overview of Topics Covered
Budget System & Structure
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01
Definition of Budget System
02
Levels: Unitary vs Federal States
03
Principles of the Budget System
04
Unity & Delimitation Principles
05
Independence & Balance Principles
06
Transparency, Accuracy & Targeting
07
Management Powers — Cabinet of Ministers
08
Budget Structure (Tuzilmasi)
09
Uzbekistan's State Budget Composition
10
Budget Classification — Definition & Purpose
11
Revenue Classification
12
Expenditure Classification
13
Deficit Financing Classification
14
Importance of Budget Classification
15
Key Takeaways
Definition of the Budget System
What Is a Budget System?
Budget System & Structure
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"The aggregate of mutual relations arising between different-level budgets and budget fund recipients, including the principles of budget formation and compilation, as well as inter-budget relations — is called the Budget System."
🔗
Interconnected
All budgets at every level are mutually linked and interdependent within the national budget system.
🏛️
Legally Grounded
The budget system is governed by the Budget System Law (Uzbekistan, Dec 14, 2000) and subsequent amendments.
📊
Reflects Structure
Directly tied to the country's political (state) structure and administrative-territorial organization.
💰
Fund Recipients
Encompasses all budget fund recipients and defines their rights and responsibilities within the system.
Budget System Levels
Unitary vs. Federal States
Budget System & Structure
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🏢 UNITARY STATES (2 levels)
Central (national) budget
Local (municipal) budgets
Uzbekistan is a unitary state
Budget system has two tiers
Examples: Uzbekistan, France, Japan, UK
VS
🏛️ FEDERAL STATES (3 levels)
Central (federal) budget
Budgets of federal subjects (states/regions)
Local (municipal) budgets
Budget system has three tiers
Examples: USA, Russia, Germany, India
Principles of the Budget System
10 Foundational Principles
Budget System & Structure
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01
Unity
02
Delimitation
03
Independence
04
Full Reflection of Extra-Budgetary Funds
05
Balance
06
Efficiency & Economy
07
Universality of Coverage
08
Transparency
09
Accuracy
10
Targeting & Purposeful Use
Unity & Delimitation Principles
Two Foundational Rules of the Budget System
Budget System & Structure
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🔗 UNITY
Unified legal (monetary) basis across all budget levels
Unified forms of budget documentation
Unified budget process principles
Unified sanctions for violating budget legislation
Unified procedure for financing and accounting budget expenditures
Unified bookkeeping for all budget levels
📐 DELIMITATION
Revenue types assigned to state, regional & local budgets
Expenditure responsibilities fixed to each budget level
National government bodies control state-level revenues
Local self-governance bodies control local revenues
Each level determines its own revenue mobilization
Each level independently determines expenditure directions
Independence & Balance Principles
Budget Autonomy and Financial Equilibrium
Budget System & Structure
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⚡ INDEPENDENCE
Each budget level has its own revenue sources
Each level independently shapes revenue structure
State & local bodies independently set expenditure directions
Savings from budget execution stay with that level
Revenue shortfalls cannot be compensated from other levels
Additional revenue from budget law execution stays local
⚖️ BALANCE
Total expenditures = Total revenues + Deficit financing
Budget deficit must be minimized during preparation, approval and execution
Revenues and deficit financing must fully cover expenditures
Extra-budgetary fund revenues must be fully reflected
Tax credits and deferrals are separately accounted for in budget records
Valatile items are typically only in the republic budget
Transparency, Accuracy & Targeting Principles
Open, Reliable and Purpose-Driven Budget Management
Budget System & Structure
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👁️ TRANSPARENCY
Budget approved in open press — must be publicly published
Budget execution reports are open and accessible
Full and accurate information provided during execution
Decision-making procedures open to public and media
Secret items only within the national (republic) budget
✅ ACCURACY
Reliable socio-economic development forecast indicators
Accurate accounting of budget revenues and expenditures
True reflection of financial data in all budget documents
Precise calculation of budget parameters
Honest reporting on budget execution outcomes
🎯 TARGETING
Funds allocated to specific recipients for defined purposes
Purposes pre-set and fixed before funds are transferred
Any reallocation of funds to unapproved purposes = budget law violation
Non-targeted use of budget funds is prohibited
Ensures every dollar reaches its intended destination
Management Powers — Cabinet of Ministers
Budget System Management in Uzbekistan
Budget System & Structure
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The Cabinet of Ministers of the Republic of Uzbekistan holds the following powers in managing the budget system:
📋
Organize preparation of the State Budget draft and submit it to the Oliy Majlis
⚙️
Organize execution of the State Budget
🔍
Coordinate and supervise activities of Ministry of Finance and other bodies on State Budget execution
💰
Establish the procedure for forming and using State target fund resources
📊
Submit the State Budget execution report to the Oliy Majlis for approval
⚖️
Exercise other powers in accordance with legislation
Ministry of Finance also plays a key role: prepares the budget draft, sets expenditure procedures, controls budget fund spending, and registers expense estimates and staff schedules.
Budget Structure (Byudjet Tuzilmasi)
The Internal Architecture of the National Budget
Budget System & Structure
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"Budget structure is the set of relations arising in connection with the formation of the State Budget — including the composition and structure of its internal divisions, their functional constraints, interdependence, interrelation, influence, and legal aspects."
Uzbekistan's STATE BUDGET Composition:
🏛️ STATE BUDGET
Republic Budget
Karakalpakstan + Local Budgets
State Target Funds
Each country's budget structure is determined by its national-state or administrative-territorial organization.
Uzbekistan's Budget Hierarchy
Multi-Level Structure of the National Budget System
Budget System & Structure
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🏛️
LEVEL 1
State (National) Budget
Republic Budget · Karakalpakstan Republic Budget · Provincial & Tashkent City Local Budgets · State Target Funds
📋
LEVEL 2
Karakalpakstan Republic Budget
Republic Budget of Karakalpakstan · District & City Budgets subordinate to the Republic
🏙️
LEVEL 3
Provincial Budgets
Provincial (viloyat) Budget · District budgets within the province · City budgets within the province
🏘️
LEVEL 4
District & City Budgets
City budget · District budgets within cities · Town budgets within districts
Budget Classification — Definition & Purpose
Systematizing Budget Data for Analysis and Control
Budget System & Structure
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"Budget classification is the scientifically based economic grouping of budget revenues and expenditures by characteristic features — systematized and coded — within an established unified system."
Why Is Budget Classification Important?
📊
Compilation & Execution
Used to compile, review, approve and execute the State Budget by bringing all budget data into a unified system.
🔗
International Comparability
Ensures budget data can be compared with international classification systems and other countries' budget data.
⚖️
Legal Obligation
Since the State Budget has force of law, all economic entities are obliged to follow the classification in budget execution.
📋
Financial Discipline
Allows monitoring of financial-budget discipline during budget revenues accounting and expenditure implementation.
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Organizational Role
Determines the organizational importance of budget compilation; forms the basis for all individual and consolidated estimates.
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Control Function
Enables monitoring of compliance with financial-budget discipline in accounting and executing budget revenues and expenditures.
Revenue Classification
How State Budget Revenues Are Categorized
Budget System & Structure
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State budget revenues are classified by their types and sources — with possible consideration of branch and ministry indicators. Revenues are divided into:
SECTIONS (Bo'linmalar)
Show separate revenue types — i.e., specific tax or revenue categories
CHAPTERS (Boblar)
Show revenue collectors — the bodies responsible for collecting each revenue type
PARAGRAPHS (Paragraflar)
Show payer categories — the specific types or groups of taxpayers for each revenue type
ITEMS (Moddalar)
Show separate types of taxes paid by individuals — the most granular level of classification
Expenditure Classification
Three Methods of Grouping Budget Expenditures
Budget System & Structure
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⚙️ FUNCTIONAL Classification
Groups expenditures according to the functions performed by state management bodies, local authorities, and other budget organizations.
Groups:
Main directions of budget fund allocation
Sections (Bo'linmalar):
National economy branches
Chapters (Boblar):
Expenditures by ministry and agency
Paragraphs:
Expenditures by type of organization or activity
Items (Moddalar):
Specific types of expenditure
🏗️ ORGANIZATIONAL Classification
Reflects the direct distribution of appropriations among recipients; groups by type of economic entity and type of activity.
Groups:
Main allocation directions
Sections:
National economy branches
Chapters:
Ministries and agencies
Paragraphs:
Type of organization/activity
Items:
Specific expenditure types
💹 ECONOMIC Classification
Groups expenditures by the economic function and type of payment — focused on the economic role and category of each expenditure.
Groups:
Main expenditure directions
Sections:
National economy sub-sectors
Chapters:
Ministry/agency level
Paragraphs:
By organization and activity type
Items:
Individual expenditure types
Deficit Financing Classification
Categorizing Sources That Cover Budget Shortfalls
Budget System & Structure
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When budget expenditures exceed revenues, the resulting deficit must be financed. The classification of deficit financing sources groups these by internal and external categories.
🏦 INTERNAL SOURCES
Government securities issued in national currency
State loans from banks and other financial institutions
Budget funds received from privatization of state property
Budget surpluses from previous years
Other domestic borrowing sources
🌐 EXTERNAL SOURCES
Government securities issued in foreign currency
Loans from foreign governments and central banks
Loans from international financial organizations (IMF, World Bank)
Loans from foreign commercial banks and firms
Other external borrowing sources
Budget Classification is developed and approved by the Ministry of Finance of the Republic of Uzbekistan in accordance with legal procedures.
Why Budget Classification Matters
Economic, Organizational & Legal Importance
Budget System & Structure
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📈 Economic Importance
Groups revenues by sources and expenditures by purposes
Enables scientifically-grounded economic analysis
Supports planning and linking national economic plans with financial plans
Determines social-cultural need satisfaction levels
🏗️ Organizational Importance
Enables compilation and execution of the State Budget
Allows compilation of individual, collective and network estimates
Facilitates preparation at republic, regional and state budget levels
Connects all entities to a unified budget information system
⚖️ Legal Importance
The approved State Budget has force of law
All economic entities must strictly follow classification in budget execution
Ensures compliance with financial-budget discipline
Any violation constitutes a breach of budget legislation
Budget System at a Glance
Summary Diagram: Principles, Levels & Classification
Budget System & Structure
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📋 10 PRINCIPLES
1. Unity
2. Delimitation of revenues & expenditures
3. Independence
4. Full reflection of extra-budgetary funds
5. Balance
6. Efficiency & Economy
7. Universality of coverage
8. Transparency
9. Accuracy
10. Targeting & Purposeful Use
🗂️ BUDGET CLASSIFICATION
Revenue Classification
By types and sources; sections → chapters → paragraphs → items
Expenditure — Functional
By functions of state management bodies and budget organizations
Expenditure — Organizational
Reflects distribution of appropriations directly among recipients
Expenditure — Economic
By economic function and payment type of each expenditure
Deficit Financing
Internal sources (national currency) vs External sources (foreign currency)
Key Takeaways — Budget System & Structure
1
The budget system includes ALL budget levels, fund recipients, and the principles governing their relationships.
2
Unitary states (like Uzbekistan) have 2-level systems; federal states have 3-level systems.
3
10 core principles guide the budget system: unity, delimitation, independence, balance, transparency, and others.
4
The Unity principle ensures one unified legal, documentary and procedural framework across all budget levels.
5
The Targeting principle means every fund has a pre-defined purpose — any reallocation violates budget law.
6
Budget structure is directly determined by the country's administrative-territorial organization.
7
Uzbekistan's State Budget = Republic Budget + Karakalpakstan & Local Budgets + State Target Funds.
8
Budget Classification organizes revenues (by source) and expenditures (functionally, organizationally, economically) and deficit financing (internal vs external).
Source: Vahobov A.V. & Malikov T.S. — Finance, Chapter 18. Tashkent Finance Institute, 2019.