Public finances are the basis for the successful achievement of macroeconomic goals and the successful fulfilment of public needs in modern or "welfare states". Public finances are based on the collection of public taxes and non-tax revenues as well as the sale of non-financial government assets. Public revenues are collected in order to fulfil the allocation function, the redistribution function and the stabilization function of public finances through public expenditure. Purposeful and efficient allocation of public revenues for productive purposes has significant potential in stimulating economic growth, directly or indirectly. The role of fiscal decentralization and fiscal equalization is very important in the case that regional and local self-government units are not able to finance the expanded scope of work independently. The analysis of public finances in the Republic of Croatia has showed that Croatia was extremely successful in the process of reducing the budget deficit and public debt, but not in stimulating economic growth, since a significant share of the budget focuses on pension insurance and public debt servicing, which are not expenditures that have the potential to generate growth.