Checking Resource Misuse
The Public Expenditure Review Commission (PERC), formed by the government a few months ago, is due to produce and submit its report soon. The candid and categorical views articulated by the commission chairman and reputed economist Dr. Dilli Raj Khanal- a PhD in public expenditure analysis - in his conversation with such widely read national dailies as the Gorkhapatra and Nayapatrika during the previous weeks, do offer a preview of the substance that will fill in the pages of the report of the much-vaunted Commission. It will be a kind of tautology that the country suffers from an unsatisfactory and dysfunctional public governance systems which expose basically rent seeking and malfeasance deeply entrenched in the bureaucratic organisations of the country.
Moreover, inappropriate allocation of public resources, inefficient, inept and corrupt revenue and expenditure systems, weak public personnel management system and poor delivery of vital public services constitute some of the major malaises of our existing governance systems. When we talk of the task of the public expenditure review panels like the one chaired by Dr. Khanal, it needs to be told that the public expenditure analysis by such bodies is very important to diagnose and account for the problems subsisting in the governance systems. However, the public expenditure analysis is generally conducted in both developing and the developed countries, according to the leading public governance scholars like Dr. Anwar Shah, with particular reference to the results and outcome-based tests.
Generally the outcome based-tests include pubic burden tests, poverty reduction tests, accountability tests, social protects tests and so on that measure the results or effects yielded by the public expenditures. However, in case of Nepal, the focus of such commissions is bound primarily to rest on expenditure and capital utilisation tests, not much on what the expenditure has been able to produce in terms of output and results. This is particularly due to the fact that our capacity to use and utilise resources is very poor. This is attributed to the resource absorption deficiency indicating that we have not been able to use and utilise the public resources being allocated and appropriated for development programmes and projects in the annual budget endorsed by the parliament.
The sordid state of the Nepali development governance is reflected in the fact that we are forced not to measure our project performance based on results and outcomes but on the expenditures incurred and consumed. Dr. Khanal has rightly observed in his discussion with media persons that we do now talk about the size of the public expenditure as if consuming resources and dispensing inputs will automatically resolve our development problems. But this is not the case. When we look at the expenditure scenario, it exposes a plethora of anomalies and irregularities growing in alarming proportions.
Not only the project implementation costs are revised upward and escalated time and again unwarrantedly but deadline of project completion is also altered and extended to serve vested interests. Furthermore, the quality of the projects even as they are completed tends to be so inferior that they need to be repaired and maintained well before they are handed over. This is not the case of one or two projects but of the entire development projects being implemented across the country.
The agonising part of the budget expenditure performance is that around forty per cent of the budget is spent during the last month proceeding to the end of the fiscal year. In such cases quality of the project cannot be ensured and maintained. It is therefore a wasteful expenditure and miscarriage of resources driven with mala fide intention. The state of recurring expenditure (non-plan) according to Dr. Khanal is very much anomalous and haphazard. No standard and consistent procedure and due process is followed. Inter heading transfer is also carried out without regard to any system and procedures breaching the all the norms of financial discipline.
Dr, Khanal talks about the dangerous and malevolent nexus and collusion between contractor and responsible government officials and politicians. Contractors are awarded not based on their capacity, merit and qualification but through collusion and unholy nexus. The mobilisation fund is released to the contractors which are also found siphoned off to real estate transactions. The multi-year projects are defined and designed not with reference to any standard criterion but by suing political levers to serve one’s own interests. Needless to say, the multiyear projects are entitled to receive funding allocation automatically every year till they are completed. Dr. Khanal talks at length about the ineffectiveness and ineptitude of the agencies and institutions that are responsible for taking action against the abuse and embezzlement of the public resources.
The National Vigilance Centre and CIAA need to be effective and act sternly. Many of the malaises of these kinds detected and observed in the management and expenditure of the national budget are also pointed out and highlighted in the Report of the Auditor General annually. But government is apathetic to implement the measures suggested in the Report which has led to further aggravate the situation.
The absence of coordination among the departments and agencies working in infrastructure building like road, electricity, drinking water, sewerage has lasted as the perennial problem foiling the efforts for development. The public resources have been allowed to go down the drain without any meaningful attempts to check the waste. It is expected that the public expenditure review commission report will not only make diagnostic assessment of the governance fault lines that have resulted in fraudulent misuse of the public resources and corruption but also suggest ways and means as to how public resource expenditure systems could be made efficient and effective.
(Rijal, PhD, contributes regularly to TRN and writes on contemporary political, economic and governance issues.)