Interest payment on debt incurred by the government is part of the ______.
Revenue expenditure
In government budgeting, expenditure is classified into revenue expenditure and capital expenditure.
Revenue expenditure is spending that neither creates an asset nor reduces a liability; it covers the day-to-day running of the government.
Interest payment on the debt borrowed by the government does not create any asset and does not reduce a liability, so it is treated as revenue expenditure, making the second option correct.
Interest payments are one of the largest components of the government's revenue expenditure every year.
Revenue receipt refers to income like taxes and non-tax revenue; it is a receipt, not an expenditure, so option one is wrong.
Capital receipt involves borrowings or recovery of loans that create liabilities or reduce assets, which is a receipt category, so option three is incorrect.
Capital expenditure creates assets such as roads, buildings or machinery, whereas paying interest creates no asset, so option four is wrong.
Interest payment on government debt is part of revenue expenditure.
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