Like any country, you get to collect Taxes so you can have enough money to do things you want in running your government. You can also charge Tariffs on any imports coming into your country — sort of a tax to protect local industry, or to punish people for looking elsewhere for things to buy.
You also get to set your Budget priorities, deciding where to spend money. Do you build a large navy, or a powerful army? Or do you have to pay off an old loan because you weren’t very fiscally responsible in the past? Some loans can help you, while others can haunt you.
There are different categories of spending — social programs, the military, enforcing law and order, etc. It’s kind of like running a business — one way or another, you have to make your income meet spending. If you want to spend a lot on something, you need to collect enough taxes to make it work. But if you take too much in taxes from your people, they’ll start to get angry, or may even begin to starve because they don’t have enough money for food!
Yes, you can take out loans, if you must. You’ll pay interest, but sometimes they’re necessary for vital national interests. Just make sure you can make your payments, or else your debt will start to crowd out the rest of your budget. If things get too bad, you may even have to declare bankruptcy, which will do nasty things to your national prestige. And if you start to miss payments, foreign banks may ask their governments to intervene with “gunboat diplomacy” to force you to pay up!
The real focus of this part of the game is “beating the budget” — you don’t have to just make do with what you have. This is the Industrial Age, and economies around the world are changing to create factories which can produce new trade goods, driving a worldwide supply and demand model.
If you build your economy properly, you’ll have more to work with later on — better prices for the goods your country produces, and better incomes for your people, which you can then tax.