Enhancement of the public finance system in order to improve functioning of the public sector is crucial for further sustainable growth and development of the economy of Serbia. For this reason, the programme budget is a significant instrument for the reform of this system aiming to provide more expedient programme funding of public policies. The subject matter of the research in this paper is a comparative analysis of line and programme budgeting and the analysis of the current situation in the process of public funding reforms in the Republic of Serbia with a special focus on the area of higher education budgeting. The aim of this research paper is to determine the performance of the programme budget in public sector in order to improve the public finance management in the case of higher education. The research results indicate benefits of applying the programme budget in the area of public funding in terms of the possibility of improving the budgetary effects and results in accordance with defined aims in the implementation of budget programmes, programme activities and projects.