Country's fiscal discipline improving

KATHMANDU:

The country’s overall fiscal discipline is gradually improving due to government’s efforts related to multi-annual planning, budget reforms, awareness programmes on tax system and implementation of treasury

single accounts, as well as oversight agencies’ vigilance on public purse handlers.

The recent PEFA (Public Expenditure and Financial Accountability) assessment conducted by the government shows that the 19 indicators out of 31 indicators of public finance management have improved when compared to the situation in 2008. The PEFA assessment was conducted for the first time in 2008 in cooperation of the World Bank Group (WBG).

The second PEFA assessment was conducted in 2014 based on the Public Finance Management (PFM) indicators that are in practice globally.

Of the total 31 indicators of PFM, 28 are related with government practices and the remaining three with that of the development partners.

As per the recent PEFA assessment report, seven indicators have achieved best performance. These indicators include comprehensiveness of information in the budget documentation; transparency of taxpayer obligation and liabilities as well as taxpayers registration and tax assessment; availability of information on resources received by service delivery units; quality and timeliness of fiscal statements, among others.

However, some crucial issues related to improvement in PFM were found to be weak despite government’s effort to improve all indicators. The key indicators that were found to be weak include internal control system, budget formulation practice (especially lack of pre-budget discussions in the Parliament), and parliamentary scrutiny over

government’s spending, audit system (both internal and external), as per the report.

Besides, the development partners also need to improve their donor practices as some are still spending money bypassing the country’s system and which does not come under the government’s purview, the report states.

As per the PEFA assessment report, two indicators have dipped compared to 2008. The proportion of extra budgetary operations increased between the given period, says the report. Extra budgetary operations mean fiscal irresponsibility, where government spends money without receiving the consent of the Parliament, as per Economist Keshab Acharya.

“The government can’t spend money that is not conceived in the budget except for in abnormal conditions like natural disasters when the state immediately needs to send reliefs.”

In addition, the report has also mentioned poor scrutiny of legislatives over the budget. This might be due to absence of Parliament for more than a year during the assessment period.

Similarly, 10 indicators have remained at the same level as in 2008, says the report. This shows reforms are needed in some critical areas of public finance management for effectiveness of internal audit; improvement of internal controls for non-salary expenditures; effectiveness of payroll controls and quality of annual financial statements.

Source: THT