What is meant by the "pay-as-you-go" funding approach?

The "pay-as-you-go" funding approach refers to utilizing current revenues instead of relying on borrowing to finance capital projects. This method emphasizes funding projects with the funds that are currently available, often from operating surpluses or designated revenues, rather than taking on debt obligations through loans or bonds.

This funding strategy is beneficial for several reasons. It avoids interest costs associated with borrowing, which can strain future budgets. It also promotes fiscal discipline, as it requires careful planning and prioritization of projects based on available funds, ensuring that the government or organization does not overextend itself financially. Ultimately, the pay-as-you-go approach aligns capital investment with the capacity to pay for it, fostering sustainable fiscal practices.

In contrast to other funding methods, such as loans or setting aside funds for future use, using current revenues emphasizes immediacy and financial prudence in managing public resources without the burden of debt.