Party interest weighs on budget transfer
The practice of budget transfer from one heading to another is taken for granted in Nepal but it is non-fiscal act with hidden political motive. Billions of rupees are transferred to different headings towards the end of annual fiscal year to increase the expenditure. This normally occurs because of the inadequate expenditure of capital budget. Apparently, the shift of hefty amount of budget to other sectors seeks to fill the budget deficit in the given projects or implement the new programmes. But this has given rise to fiscal anarchy with negative implications for the economic development of the country. Economists have concurred that such a fiscal practice hardly promotes balanced development and inclusive economic growth.
“The tendency of transferring the budget from one section to another under the political pressure political is not sound economic practice as it undermines balanced development of all regions,” said Dr. Shankar Sharma, former vice-chair National Planning Commission.
Dr Sharma said, however, it was quite good to transfer budget in time if it was based on necessity but most of the unspent budget is transferred in the last two/three months of the conclusion of annual fiscal year.
“The political parties used to transfer budget by creating new projects and political programmes which are unlikely to give momentum to the development activities. It will be rational to transfer budget before the month of Chitra by analysing those projects facing budget shortage”, he said.
The government allocates budget based on poverty, infrastructure and development of the regions, States and local units. Prior to the preparation of budget, the lawmakers and political leaders and cadres make a beeline at the Ministry of Finance to press the Finance Minister to funnel budget to their election constituencies.
Dr Sharma insisted that there was no compulsion for the ministry to transfer budget even it was going to be frozen because unspent amount would be spent next year.
Former finance minister Surendra Pandey said that budgetary transfer happened even in the starting of the fiscal year. “It is long-standing practice to transfer huge amount of budget at the eleventh hour but the concerned ministries do not request for the budgetary transfer in the beginning. It is an irony that they receive budget where they cannot spend it.”
According to Pandey the foreign assistance constitutes around 35 per cent of development budget. When there is delay in receiving payment from foreign donors, budget is transferred to overcome resource deficit. Sometime the Ministry of Finance is impelled to transfer budget to another project to increase capital expenditure and show performance, he said.
“The budgetary transfer goes against the principal of budget as its objective is to spend budget on the particular project and programmes. This exposes inability of the concerned ministries and project executing agencies,” he said, adding that ministries divert budget to other headings to suck up to the politicians.
This contradicts the international practice wherein the concerned agencies are subject to legal action if they fail to spend money as outlined in the budget. In Nepal, there are no specific laws to address this sort of fiscal behavior. Instead, it continues to flourish under the political patronage.
Lawmaker Ram Narayan Bidari said that such a practice would result in under-utilisation of tax payers’ money.
“As per the provision, annual budget needs to be spent by Nepali month of Asar 15 every year, but it is generally moved into other headings during the months of Baishak and Jestha. How can development works be completed in a month?” he said, adding that the present government should take up this issue seriously. He was of the view that budget could be transferred into other areas in case of emergency situation such like natural disaster but there should not be budget transfer after Chitra.
Uttar Kumar Khatri, spokesman at the Ministry of Finance, defends the budget transfer, citing that it is based on due process and existing legal provisions.
Principle of necessity
“The government transfers budget judiciously based on the principle of necessity. It is done to make sure that those projects facing budget shortage are not disrupted,” he said. However, the government has initiated to allocate budget by analysing the potentiality and readiness projects from next fiscal year which is likely to control the budgetary transferring tendency.
Disagreed with Khatri, information officer at the Financial Comptroller General Office Dinesh Regmi said that transfer of huge amount of budget laid bare the facts that it was not realistic and project selection deficient.
“This is a clear example that executing agencies are incapable to predict whether the particular projects could be implemented in time. Though the practice of transferring big amount of money to other headings does not impart positive message, it is not entirely wrong either,” added Regmi.
(Kafle is a TRN journalist)