Govt at a loss for lack of laws to manage public finance

  • budget formulation
- RUPAK D SHARMA, Kathmandu

Apr 5, 2017- Government officials seem to be at a loss over budget formulation for the next fiscal year, as three crucial laws required to manage public finance in a federal structure are yet to be finalised. This has left officials rushing to scout for stopgap measures, as less than two months are remaining for the annual budget to be presented in Parliament.

The government encountered this unique problem after the country formally embraced the new local restructuring in March in line with the new federal setup, which led to dissolution of different bodies in local, district, zonal and regional levels. These are replaced by 744 new local units. 
These local units, as per the constitution promulgated in September 2015, can frame the annual budget on their own. In other words, the local units now have the authority to come up with their own estimates of income and expenditure and execute different tasks, including development works, accordingly, without consulting with the central government. But to allow the local units to exercise this power, the government must come up with three sets of laws. First is the National Natural Resources and Fiscal Commission Act based on which the National Natural Resources and Fiscal Commission will be set up. The commission, among others, will distribute revenues between the federal, state and local governments, set parameters for distribution of grants to state and local governments, and propose debt ceilings for federal, state and local governments.
Another law that is required is the Intergovernmental Fiscal Transfer Act which basically ensures resources are distributed in fair and equitable manner, and promotes fiscal discipline and good governance. Yet another set of law that is required is the Intergovernmental Relations Act (IRA) , which defines relationship between government units at federal, state and local levels so that they could extend cooperation in a cordial manner. 
Drafts of the first two  laws should be prepared by the Ministry of Finance, while draft of the IRA should be framed by the Office of the Prime Minister and Council of Ministers.
“We are about to finalise the drafts of the National Natural Resources and Fiscal Commission Bill and the Intergovernmental Fiscal Transfer Bill,” Finance Secretary Shanta Raj Subedi said. Once the Law Ministry approves the bills, they will be sent back to the Finance Ministry before being forwarded to the Cabinet and then to Parliament.
To facilitate budget formulation process, a taskforce has also been formed under the Member Secretary of the National Planning Commission, Chandra Kumar Ghimire. The taskforce has prepared a guideline on public finance management, but it is yet to be approved. Government officials involved in budget formulation are racing against time to find an amicable solution, as local elections are scheduled to be held on May 14. After elected officials assume office, they are expected to have a say on budget formulation before the final budget is presented in Parliament on May 29.
“The elected officials, for now, will not be able to enjoy all the rights [regarding budget formulation], as laws are yet to be finalised,” said Madhu Kumar Marasini, head of the Budget and Programme Division at the Ministry of Finance. “But we will play a facilitator’s role to ensure they get adequate resources.”

Published: 05-04-2017 07:48

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