Govt asked to strengthen public financial management systems

KATHMANDU:

The World Bank (WB) has asked the government to strengthen its public financial management systems and practices, which, according to the multilateral donor agency, are ‘dysfunctional’ and thus eroding the state’s ability to fully utilise the annual budget.

The statement comes at a time when the government has failed to spend even 50 per cent of the budget after nine months into the fiscal year.

The government spent only Rs 241.81 billion, or 46.75 per cent of the total annual budget of Rs 517.24 billion, in the nine-month period to mid-April, show the latest statistics of the Financial Comptroller General Office.

Particularly worrying is the state of capital expenditure, which stood at Rs 26.26 billion, or 30.86 per cent of the total allocation of Rs 85.10 billion, during the period.

“The answer to this under-investment lies in public financial management systems that are well defined on paper but dysfunctional in practice, with critical gaps at all stages of budget planning, formulation and execution as well as deficient oversight capacity and systems,” says the WB’s Nepal Economic Update 2014 which was released here today.

Such poor performance in public spending was reported in a year when the full budget was introduced right on time.

Because of low public spending, the country recorded a budget surplus last fiscal and that trend is expected to be repeated this fiscal as well due to healthy revenue growth — although the government reported budget deficit of Rs 43.97 million at the end of the nine-month period.

“It is a paradox that public investment has not picked up despite the fiscal space,” said WB Country Director for Nepal Johannes Zutt, referring to the budget surplus of Rs 56.1 billion reported at the end of the sixth month of the current fiscal.

Fiscal discipline is a means to an end, but in Nepal it appears to be pursued as an end in itself, with the government unable to plan and implement the budget, notes the report, adding, the government should carry out an in-depth review of the entire budget chain from planning to budgeting and execution.

It is essential for Nepal to take advantage of the ‘fiscal space’, as according to Zutt, ‘private investment also depends on public investment’.

Source: THT