GOVERNMENT BUDGET FORMULATION AND IMPLEMENTATION PROCESS IN NEPAL

GOVERNMENT BUDGET FORMULATION AND IMPLEMENTATION PROCESS IN NEPAL Babu Ram Subedi Under Secretary, Go. N

BUDGET? v. Expenditure plan of an organization or a person (Traditionally, estimates of revenue and expenditure) v. Future orientation v. Defined objective v. Pinpointed in monetary terms v. The Major objective of the government budget is to maximize “ public interest” (of the people at large) v. A major tool of fiscal policy

MAJOR GUIDELINES FOR BUDGET FORMULATION The Constitution of Nepal guides the budgetary process ( Part 10): v. Finance Minister shall present the estimate of the revenue and expenditure for every fiscal year before the joint meeting of the houses(parliament) (Article 119): -Estimates of Revenue -Expenditure (Non –votable amounts): above consolidated fund -Expenditures from consolidated fund -Progress of the past year v. Date fixed for budget presentation (Jestha 15)

BUDGET FORMULATION PROCESS (TOP-DOWN PROCESS) v. Major responsibility of budget formulation rests on Ministry of Finance(FPA, 1999)p v. Budget and Resource Committee at NPC set the following: -Macroeconomic Framework -Medium Term Expenditure Framework -Size of the budget v. Ministry of Finance set the budget ceiling v. Budget ceiling is circulated to the ministries, ministries to departments and departments to spending units v. Budget Formulation Guidelines 2072 has set the formulation calendar(Start from November)

BUDGET TYPES v. Capital budget: generating capital goods e. g. construction of dams, roads & equipments v. Recurrent Budget: generally the administrative costs and costs on soft programs e. g. health service extension , educational and others v. Financing: share and loan provided to PEs, Principal and interest paid by the government (Nepal)

BUDGET FORMULATION PROCESS. . . (BOTTOM-UP PROCESS) Role Institution Parliament Approves the budget Ministry of Finance Consolidates the budget National Planning Commission Tripartite negotiation(Ministries, NPC and Ministry of Finance) Ministries Ministry level consolidation and refinement Departments Compile and refine Spending Units Prepare the programs and budget

BUDGET IMPLEMENTATION PROCESS v. Once the Parliament approves the budget, Ministry of Finance Provides "Authorization " for spending to the "Secretaries" of the Ministries v. Secretaries provide authorization letters to the "Department Heads" v. Department Heads provide authorizations to "Spending Unit Chiefs" v. Spending Units spend money based on the approved programs v Revenue is collected by tax offices and other authorities

BUDGET IMPLEMENTATION: BUDGET RELEASE PROCESS v. Spending Units spend the money and submit Payment Requests to the District Treasury Offices(DTCOs) v. DTCOs verifies and entered the transactions into the TSA (Treasury Single Accounts) System (which is online/web-based central system) v. DTCOs issue the Cheques against the payment requests and handover to the SUs v. Spending Units pays cheques to the concerned parties/vendors

BUDGET REVIEW AND AUDIT PROCESS Review Process: v Budget review is made by Development Action Committees(trimester basis) -National Development Action Committee: Chaired by the Prime Minister -Ministry Level Development Action Committee: chaired by Ministers v. Ministry of Finance conducts Mid-term review v. Sometimes Parliamentary Committees conducts review/query budget implementation

BUDGET REVIEW AND AUDIT PROCESS…. . Audit Process: v. DTO conduct "internal audit" on behalf of Financial Comptroller General Office v The Auditor General conducts final/statutory audit of government transactions v. Public Accounts Committee of Parliament review the Report of the Auditor General

STRENGTHS OF NEPALESE BUDGETARY PROCESS v. Multi-year forecasts (MTEF, 3 Years forecast practices) v. Budget Formulation Guidelines (2015) and implementation Guidelines v. Budget Calendar v. Spending based on the approved program v. Online submission of budget by ministries to the MOF v. Web- based Budget release system : the TSA system v. Annual Statutory audit

WEAKNESSES v. Line item budget : weak focus on "Program Budgeting" v. Low level of revenue base (17 percent of GDP) v. Weak productivity(especially of Capital budget, as well recurrent) v. Calendars generally violated: eleventh hour workout v. Weak internal control system v. Performance audit is lacking v. Parliamentary control (in practice) weak and sometimes biased

THE WAY FORWARDS v. Perspective budgeting( Medium-Term Budgetary Framework) v. Focus on: productivity and 'programs' v. Gear up capital budget (size and implementation) v. Enhance 'implementation capability', 'internal control system' and 'M&E' v. Performance audit v. Strengthen parliamentary control v. Follow the Calendar

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