Donors overlooking govt budgetary system: Report
KATHMANDU, APR 22 - Despite repeated calls from the government to use the national system to channel foreign assistance, a large portion of the donors’ money has remained outside the country’s budgetary system.
As much as 36 percent of the total donors’ fund was disbursed in the last fiscal year, bypassing the country’s budgetary system, according to the Finance Ministry’s Development Cooperation Report 2012-13. Of the total $960 million foreign assistance extended to Nepal, $345 million was disbursed outside the country’s budgetary system.
In an indication of donors’ declining faith on the government system, disbursement of foreign aid outside the budget system, also known as ‘off budget’, increased by 13 percent in the last fiscal.
Off budget assistance are not registered in the government’s red book that keeps record of annual programmes, budget and sources of funding. The ‘off budget’ assistance include technical assistance (TA) and the projects implemented through national and international non-government organisations. “Such aid has been spent to support the civil society and the private sector through various development partners,” reads the Finance Ministry report.
Even in the case of assistances that come through the budgetary system, only 46 percent was disbursed through the national treasury using public financial management system.
As the government and the donor agencies prepare for annual consultation on Nepal Portfolio Performance Review meet scheduled on Wednesday, Finance Ministry officials say they would like to urge the donors to put in their assistance through the national system.
“Off budget aid does not come under the government purview and we cannot evaluate performance of such aids,” said Madhu Marasini, chief of International Economic Cooperation Coordination Division at the Finance Ministry.
While most of the multilateral donors have complied with the government call, bilateral donor agencies are often found to be extending their assistance through unofficial channels. For example, 99 percent of USAID assistance in the last fiscal year was outside the government system while it was 100 percent for the Netherlands. The other bilateral donors disbursing huge money through ‘off budget’ mechanism are the European Union, the United Kingdom, Germany, India, South Korea, Norway and China.
Among the multilateral donors, World Bank and Asian Development Bank spent 2 percent and 7 percent of their assistance outside the government system.
Economists attribute donors’ lack of faith in the government system for the rise in ‘off budget’ spending. “The government system is weak and it takes a long time to spend budget which has encouraged the donors to use their own system,” said Shankar Sharma, former vice chairman of the National Planning Commission. “Also, there is no policy to discourage the donors from using other mechanism outside the government.”
On the other hand, the donors point out government’s poor aid absorption capacity for their ‘off budget’ approach. In the last few years, the government has struggled to spend the capital budget where the donors have put most of their money. The donors have blamed corruption, frequent transfers of government officials and project chiefs and failure to conduct timely audits for their increasing reliance on “off budget” mechanism.
Rajib Upadhyay, senior external affairs specialist at the World Bank, offered some reasons for the donor behaviour. “Assistance for the ongoing peace-building support also remains typically off-budget.
Moreover, given the pre-election uncertainties and consistent under-performance of the budget, some development partners may have deliberately chosen to invest partially off-budget in post-conflict dividends,” he said. The Koirala government is now preparing to introduce a new foreign aid policy with strong provisions that require the donors to follow the national system.
Former Finance Minister Bhekh Bahadur Thapa reminisces how during the Panchayat the state had strong provision that all foreign aid came through the government’s system. But the tendency of accepting whatever donors offer increased post 1990, he noted. “The activities under the foreign assistance should at least come under the government’s scrutiny if they are not controlled completely,” said Thapa.
Source: The Kathmandu Post
