**Table 3.3 Economic classification of government expenditures—current expenditures**

|**Category/subcategory**|**Definitions**|
|---|---|
|**Compensation of employees**|Consists of all compensation of government employees including_social contributions_by<br>employers. Includes payments in cash or in kind. Social contributions paid by deduction from<br>employees’wages and salaries are also included in this category.|
|**Use of goods and services (maintenance)**|Routine and periodic spending to keep an asset in functioning order.|
|**Other use of goods and services**|All other expenditure on goods and services.|
|**Consumption of fixed capital**|Consumption of fixed capital is the decline in the value of the stock of fixed assets during the<br>accounting period as a result of physical deterioration, normal obsolescence, and normal<br>accidental damage. Consumption of fixed capital related to fixed assets used in own account<br>capital formation is excluded from this category and included as part of the value of the asset<br>produced. It is always a noncash expense.|
|**Subsidies to public corporations**|Subsidies are current transfers that government units pay to enterprises, either on the basis of<br>the levels of their production activities or on the basis of the quantities or values of the goods or<br>services that they produce, sell, or import. Included are transfers to public corporations that are<br>intended to compensate for operating losses.|
|**Subsidies to private enterprises**|Subsidies are current transfers that government units pay to enterprises, either on the basis of<br>the levels of their production activities or on the basis of the quantities or values of the goods or<br>services that they produce, sell, or import. Included are transfers to private enterprises that are<br>intended to compensate for operating losses.|
|**Grants and transfers**|This category captures transfers of conditional grants for financing current spending to lower<br>levels of local government.|

_Source: Adapted from IMF (2001)_ _Note_ : See annex 3 for a more detailed description of the content of each category.

In terms of the benefits of monitoring infrastructure spending, the GFSM 2001 economic classification (COFOG) allows—at the very least—for a rough distinction between current expenditures and capital expenditures. This distinction, even if basic, is extremely important when analyzing infrastructure costs and planning infrastructure needs. The systematic lack of reporting of the capital/maintenance split may well be a cover used by governments when not properly spending and/or allocating resources on needed maintenance requirements.

It is also critical to try to capture external financing that can be traced to specific activities. In this regard, two additional categories have been added to the capital expenditure categories so as to single out infrastructure capital spending that has been financed through the budget using external funding.

The GFSM 2001‘s economic classification, when cross-referenced with the functional classification, becomes an enormously powerful tool. Nevertheless, the GFSM 2001 has drawbacks in recording expenditures at the microeconomic levels needed for sector level analysis and decision making by sector specialists.

In particular, the IMF economic classification does not provide a definition of rehabilitation, although a country might have its own. If the country does not have a definition, the user should flag this and be guided by the following principles in deciding whether an expenditure item should be classified as rehabilitation. Line ministries could also help identify rehabilitation activities by applying these principles: 39