Kathmandu. The Nepal government is constitutionally obligated to present the budget on Jestha 15. The government, which has been bringing a deficit budget every year, has not been able to fully spend the allocated budget for a long time. The government is obligated to reduce the budget in the mid-term review of all fiscal years.
The government is also obligated to spend more than its income. A large part of the budget is being spent on ordinary expenses and foreign debt repayments rather than on development expenses. This upcoming fiscal year’s budget is being prepared amidst a huge imbalance between income and expenditure.
There are many expectations in the upcoming fiscal year’s budget amid long economic turmoil and disappointment. In this context, News Agency Nepal has talked to former Chief Secretary to the Government of Nepal Bimal Koirala about the budget for the upcoming fiscal year 2082/083.
Presented: An edited excerpt of a conversation with former Chief Secretary Koirala about the budget.
The budget is being prepared, is this process correct?
The budget work has now begun. In particular, it has been many years since we talked about refining the budget preparation process. Our revenue and foreign aid sources are not even estimated. Grants and loans are estimated, but they are coming in very little.
If we look at the expenditure side, there is a practice of arbitrarily placing the budget under random headings. It was not effective from allocation to implementation. The revenue estimate was also not realistic. That is why this budget looked fake. Efforts have been made for many years to improve it. There will be partial improvement, but the accuracy that should have been brought in the budget does not seem to have been achieved.
The government seems to be looking for a financial accountability system through an ordinance. It was not even necessary. Because we have not complied with the Financial Accountability Act. If we are not complying with it and are not doing so, there is no point in amending it.
If the purpose for which the act was introduced was followed, it would have been right to amend it because there is a difficulty here, what difficulties will arise if we do not take any initiative and we had to amend it. If the government does not have the mentality to strictly follow it even after amending it, there is no point in it. We must move forward with a comprehensive reform in the budget process.
Are the estimates made in the budget inaccurate?
Our facts have shown that the estimates made in the budget are currently inaccurate. First, the revenue estimates in the budget are inaccurate. The revenue estimates are made by the Resource Management Committee sitting in the National Planning Commission, and later, when the expenditure increases, it becomes difficult to match it without increasing the revenue, and we have failed in many places by forcibly increasing the revenue target.
Second, expenditure management is seen as the weakest point in Nepal. If we look at the expenditure side, it is seen that the expenditure has increased due to the method and process of allocating expenditure based on politics rather than estimates, while the sources of income appear weak, and then the method of estimating the resources that will come from our foreign aid grants and loans.
The resources have not come as expected. As a result, some projects that depend on foreign grants do not start, and sometimes even if they start, they do not work. Therefore, we need to improve the allocation system, and if we can manage the expenditure in a more rigorous manner, there will be some improvement in the budget system.
Is there a practice of bringing a big budget but not implementing it?
##
## In a country with a ‘hard budget consensus’ where there is not much income, it is better to select a few projects and ensure resources for them rather than creating a situation where spending is excessive and resources are not available. That is also an effective allocation method. The political leadership should dare to go in that direction. But such political leadership is not seen now.
##
## ##What should be the priorities and principles of the future budget?
##
## Budget priorities and principles cannot be written down on paper. There is no particular flaw in writing on paper even now. Everything is written down in the history of everything that is known. The main thing is that when we make a budget, we should now remove all the petty plans. If we could only keep the plans that are already underway and those that are committed to completing them or all the others in the budget, it would be a more practical budget. No one dares to do that now.
We are getting information that projects are being kept in the budget booklet even at the end of the budget preparation. That is not right. Our thinking has been towards political favoritism and populism rather than building the country. Until we get rid of this, a budget full of political noise will come. Therefore, if we can adopt rigor in expenditure management, it is possible to come up with a good budget with these budget priorities.
The government’s revenue income does not look very encouraging and recently, donor agencies have started cutting even foreign sources. How can we find resources now?
Yes. Our source of income is shrinking. It is not possible to increase the revenue rate. Because Nepal is one of the countries with the highest rates in South Asia. If the rate is increased further, the risk of investment decreasing is high and there is a risk of further harming the economy.
Therefore, the scope should be broadened beyond the rate. One area where the scope can be increased is the informal economy. There should be no further delay in bringing a large part of the country’s informal economy towards formalization. If informal transactions can be brought under the tax net, one-third of our economy can grow. This will also make it easier to manage our expenses.
Currently, there is a great challenge in increasing foreign aid. Foreign aid is in the process of decreasing. There is no possibility of increasing aid from the US. The UK is also cutting back, and Germany and Japan are also doing the same. As a result, only grants are seen to be decreasing in foreign aid. There is no other option to compensate for this except by bringing our informal economy into the formal economy and increasing revenue. Another compensation is to increase investment. It is not that easy for us to increase investment either.
The challenge seems to have increased when FATF put Nepal on the grey list. Now the way has been opened for foreign investors to look at us with suspicion. While we are unable to dispel doubts and even though the laws have been enacted, our implementation is weak. There is still no sign of improvement in the implementation of laws and regulations. Therefore, there is no sign of a significant increase in the investment sector.
It has also taught a lesson to raise our own resources for the development of the country, to make maximum use of our own resources, to allocate budget only for programs that can be completed on time, and to benefit the people. The budget should be made in a way that only shows hope to the people and gives them direct benefits.
While current expenditure is increasing rapidly, capital expenditure seems to be declining further. A large amount is being spent on debt obligations. How should this be managed now?
The country is in a very embarrassing situation. Under our foreign aid, a larger budget than capital expenditure has to be allocated for the payment of interest on loans, and this is even increasing. This does not seem to be decreasing and if it does not decrease, the capital budget will decline further.
Nothing can be more unfortunate for the country’s economy than this. Capital expenditure could have been increased, but our implementation side has become weak. It is necessary to correct the errors in the appropriation process and now focus on increasing capital expenditure. Less than two months after the budget is introduced, the Ministry of Finance has a queue of non-budgetary requests. Politics There is a tendency to ask for money from MPs through backdoors for projects that are not included in the budget. Our state machinery is encouraging this.
This makes it difficult to evaluate the budget and it is also difficult to bring agility in implementation. Because those projects have come up with words without economic and technical examination. We need to be able to change such a situation, which seems to increase capital expenditure.
There are plenty of places where some improvements can be made. For example, by keeping the information of ministries that spend a lot of money with the Ministry of Finance, where there are weaknesses, where the budget is insufficient, it can be monitored and a system can be developed to increase spending effectively. But it does not seem to be done now.
Therefore, capital expenditure has not been able to increase arithmetically for the last 5-7 years. Without increasing it, if our domestic investment does not increase, foreign investment will not increase either. Therefore, we should work towards increasing capital expenditure to 100%.
Finally, analyzing the current situation, what is the size of the budget that Nepal can afford?
Right now, we need a budget of about 1.7 trillion. We do not need a budget above that and should not go. If there is more political will, it would be okay to go up to 1.7 trillion, but if there is a budget of 1.7 trillion, it can be practical.
If we look at the resources, it is possible to bring the informal economy into the formal economy right now. It is not possible to bring all of it, but it is possible to bring half of what we estimated. Which will provide good resources. It is possible to raise more money than what comes in our grants. Now, a distribution-oriented, political budget is not necessary. A poor country like ours should make a budget with a lot of thought.
प्रतिक्रिया दिनुहोस्