Budgeting Trilochan Poudyal

Budget Concept Introduced in England in 1773 from a French word ‘bougette’ that means a leather bag, while opening it by the Chancellor of Exchequer in the Parliament to present government’s financial plan for approval. A financial plan and a major policy instrument to establish macro economic stability, allocative efficiency and fair distribution of income/resources.

Budget Concept A policy making tool used to translate strategic objectives into programs and services to meet the socio-economic needs of the people. Contains overview of the economy; annual revenue and expenditure plan; information on assets and liabilities; and appropriations.

Objectives Enhance economic growth; Establish a sustainable fiscal framework; Allocate resources to programs on the basis of governmental priorities and program effectiveness; Operate and deliver public services efficiently; Ensure that the budget reflects citizens’ preferences;

Objectives Ensure that spending units are well equipped and are accountable for their actions; Maintain balance between socio-economic and spatial (geographic) development; and Make socio-economic transformation of the country.

Types of Budget Line item budget or incremental; Zero-base budget; Program budget; Performance budget; Voted and non-voted; Capital and operating/recurrent;

Development and ordinary; Core and external; Participatory and non-participatory; Central, provincial and local budget;

Principles of Budgeting Annuality Universality Accuracy and timeliness Comprehensiveness Legitimacy Flexibility and Predictability

Fiscal discipline Transparency and accountability Allocative efficiency Contestability

Budgeting Framework Policy framework: Meeting the goals and targets such as of the SDGs, SAARCDGs, LDC Graduation strategies, Plan Objectives, Medium Term Expenditure Framework; Meeting Sectoral Policies and Targets; Reducing poverty; Better Public Service Delivery etc. Legal framework: The Constitution; Public Finance and Expenditure Management Law; Public Procurement Law; Int’l Monetary Fund’s guidelines. Other documents of legal importance such as multilateral and bilateral agreements, commitments.

Budget Cycle Formulation Approval Budget Execution Evaluation: Control and External Audit

Budgetary Process in Nepal Resource Estimation by the Resource Committee at NPC; Budget Ceiling and Guidelines by NPC (by Sector and the District); Budget Formulation: Top-down, Bottom-up, Lateral ; Budget Discussion at the Ministry/NPC/MOF; Program-budget approval by NPC & the Cabinet to submit to the Parliament

Budgetary Process in Nepal Budget Approval followed by Spending authorization with guidelines by MOF; Budget disbursement and execution by spending Units; Treasury Single Account (TSA) and Internal audit; External/Final audit and reporting to Head of the State; Discussion on the Parliament- Public Accounts Committee and action to be taken up thereafter.

Recent Trends Gender Responsive Budgeting Pro-poor Budgeting Climate Change Budgeting Post-disaster Rehabilitation and Reconstruction Projects of National Pride: 21 (irrigation 4, roads 7, power 3, airports 3, culture 2, drinking water 1, forestry 1=21) Priority-wise allocation: Budget for prioritized project LDC graduation consistent budgeting: a thrust for graduating Nepal from the LDC category to DC status by 2022. Also, Vision 2030 in progress.

Challenges and Way Forward Maintaining macro-economic stability (maintaining fiscal discipline; ensuring efficiency of public resources; maintaining monetary stability; strengthening financial system; and enhancing private sector in economic activities) and allocative efficiency; (scattered resources, issues of common virement) Balancing allocation between capital and recurrent expenditure Balancing spatial distribution(ecological zones, development regions; rural/urban): physical connectivity and Electrification;

Streamlining resources to post-MDGs/SDGs, SAARCDGs, 14th Plan/LDC graduation strategies/ programs, ad hoc/political project demands; Balancing allocation across targeted areas (targeted districts, social groups); Ensuring budget for the projects of national pride; Dependency on external sources ( around 25%); Low level of spending (surplus budget);

Imbalance of payment in foreign trade; Remittance oriented economy often unsustainable; Ignoring industrial sector development (overlooking the issues of sick industries); Unsustainable social security allocation (pension, security benefit age); New generation economic reforms in doldrums (stagnation); Addressing the consumerist behavior of the ever ambitious public sentiments; and Post Earthquake Rehabilitation & Reconstruction (Rs.151.08b).

Distribution oriented (social security, growth in salary and facilities, constituency development programs, relief package for conflict affected people, redressing the concerns of the people affected by natural disasters; and to the farmers in terms of loan and subsidies)

Financial Summary of Budget 2017/18 vs. 2018/19

Heading Amount(Billion) Revenue 730.05 Repayment of debt principal 15.00 Foreign Grant 72.17 Foreign Loan 214.04 Cash reserve of fiscal year 2016-17 102.73 Internal Loan 145.00 Total 1,278.99

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