Govt fund reallocation at three-year low

KATHMANDU:

The government transferred funds worth Rs 35.31 billion from one budget heading to another in the current fiscal year, as ministries scrambled to exhaust financial resources towards the end of the fiscal year.

The amount reallocated this fiscal, however, is the lowest in the last three years, considering budget reallocation of Rs 38.47 billion made in the last fiscal and Rs 38.67 billion made in 2011-12, the official data of the Ministry of Finance (MoF) show.

Of the total amount that was reallocated this fiscal, which will end in mid-July, Rs 20.76 billion was transferred among budget heads of the same ministry, while Rs 14.56 billion was transferred from the budget head of one ministry to the budget head of another ministry.

As per the Financial Procedures Rules 2007, a secretary of a ministry or the head of a department can transfer up to 25 per cent of funds from one expenditure topic to the other within the ministry on their own. But to reallocate more funds, they need to get the Finance Ministry’s approval.

Likewise, the Finance Ministry can transfer up to 10 per cent of funds from the budget head of one ministry to the budget head of another ministry.

“The inter- and intra-ministry fund transfers that took place this fiscal did not breach these norms, as we have been closely monitoring the process,” a high-ranking official at the Ministry of Finance told The Himalayan Times on condition of anonymity. “So, everyone needs to consider virement as part of public finance management and takes place every year.”

Budget reallocation takes place throughout the year as the Finance Procedure Act 1998 allows such transfers.

However in Nepal’s case, the pace of fund transfers picks up after the second half of the fiscal and reaches a peak towards the year-end when all ministries come under pressure to meet the annual spending targets.

One of the reasons why fund transfers pick up speed towards the year-end is the inability of various projects to utilise the money on time.

“This happens because of lack of effective planning, delay in project start-up, lingering tendering and procurement processes, and lack of proper oversight,” the Finance Ministry official said.

To cover up this weakness, what ministries do — especially towards the end of a fiscal — is take away budget earmarked for a project and divert it to some other project which is seeking additional financial resources.

Yet, not all fund transfers root from government’s inefficient budget allocation practice, as the budget can also be reallocated in case the funds are surplus.

For instance, a ministry may have to reallocate funds if it is able to save some money by implementing a project at a lower cost than estimated.

However, some conditions need to be followed to transfer budget from one heading to the other. For one, budget allocated for capital expenditure, like building of roads and other physical infrastructure, cannot be diverted to pay salaries of civil servants, which falls under recurrent spending. But budget allocated for recurrent spending can always be transferred to cover costs related to capital expenditure.

While there are guiding principles for fund transfers, some ministries do try to bend the rules. And this is one of the reasons why the Parliament proceedings have been disrupted since last Friday, as opposition parties are claiming that funds were reallocated in an ‘unlawful manner’.

The Finance Ministry said it is yet to conduct a full-fledged investigation into the charges levelled by opposition parties.

“But we are quite confident that the laws were not breached,” the official said, without ruling out the possibility of transfer of funds from relatively ‘good project’ to a populist one designed to secure vote bank and thus may not have much impact on the country’s development process.

“Yes, we have heard of budget being transferred to populist programmes especially at the Ministry of Federal Affairs and Local Development. But we have not received details on it yet,” the MoF official said.

Source: THT