Reducing Liabilities

There was a time when spending on public sector was considered unnecessary. Laissez fair economists insisted on limiting the public expenditure with private sector having a vital role in the economic growth. But this idea that prevailed during 18th and 19th century has become obsolete in 20th and 21st century as the nations have embraced the concept of welfare state, enormously enlarging their structures and expanding their activities. Renowned economist J. M. Keynes laid emphasis on the role of government in boosting social and economic activities to the benefit of common people. It is true the role of market forces can’t be shrugged off entirely but the government has a huge responsibility in meeting the rising expectations of public. This requires the allocation of substantial portion of national budget for building basic economic infrastructure and implementing the social security schemes.

But the nation is beset with economic quandary. There lies a huge disproportion between the general expenditure and capital expenditure, putting the government in a tight spot. In the new fiscal year budget, the Finance Ministry has earmarked Rs. 957.10 billion for general expenditure and Rs. 408.05 billion for the capital expenses. The soaring recurrent expenses have sucked a lion’s share of total outlay, prompting the government to explore the ways to cut unnecessary expenditures and make public expenditure effective and productive. To this end, it had constituted the Public Expenditure Review Commission (PERC) to suggest for effective public expenditures. According to the news report, carried by this daily the other day, the PERC has suggested dissolving many a government committee running under different ministries to reduce their liabilities. The recommendation seems sound in view of the increasing administrative costs incurred by the three-tier of governments-- local, state and federal.

Commission chair Dr. Dilliraj Khanal said that it is imperative for the government to dissolve majority of such committees, handover some to the state governments and merge others. The 2017 report of Office of Auditor General had put the number of such committees at 897, which cause huge financial obligation for the concerned ministries. Ironically, the Finance Ministry is not aware of these futile mechanisms that have taken their toll on the state coffers. The commission that is yet to release its report formally has suggested reducing the number of ministries in federal government to 16 and the number of civil servants to 22,000. Other suggestions include devising concrete standards for recurrent expenditures at federal, state and local levels, making government grants productive, distributing social security budget in an integrated manner and bringing various funds operating without proper legal provisions within the ambit the parliamentary and audit system.

Setting credible criteria for fiscal support to public corporations, designing a modeling budgeting system for the state and local government and not exceeding the recurrent expenditure of all layers of government from 27 per cent of GDP and developing performance-based budgeting system is rational advice. It has become urgent to push systemic reforms in the selection of projects and its implementation given that national pride projects are not faring well. Government officials and private agencies assigned to construct public infrastructures must be held accountable so as to ensure that public money is judiciously spent. The public expenses should be made in such a way that they benefit all sections of society, particularly those on the margins of society. In this regard, the commission’s suggestions need to be implemented effectively for the productive public expenditures.  


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