Legal flaws behind transfer of funds, say economists

KATHMANDU, June 6:

While the government has been accused by the opposition parties of transferring unspent budget from one heading to another, economists have pointed out loopholes in the prevailing laws the ruling parties have been taking advantage of over the years for such transfer of funds.

“The parliament itself provides the right to the government of transferring 10 percent of the total budget under any heading to other headings through the Financial Act,” senior economist Prof. Bishwambher Pyakuryal told Republica adding, “Line ministries can transfer the budget under this provision after taking the permission of the Ministry of Finance.”

Ministry of Finance also has the choice of transferring money under the heading Miscellaneous and Contingent fund for emergency purposes under a provision in the Act. Under the scheme, Finance Ministry can release funds to line ministries, constitutional bodies, apart from itself and other agencies.

Despite these weak spots that aid budget manipulation, the political parties have shown no urgency to reform the expenditure policy. “Political parties have not shown willingness to introduce ´Integrated Public Expenditure Policy´ that proposes changes to the way public expenditures are mobilized because it would plug all the loopholes being misused by ruling parties from a long time,” Pyakuryal stated.

The previous governments have also faced accusations of moving funds to non-budgetary headings. Concerns were raised particularly over the transfer of funds to local development bodies as such funds have been widely believed to be funneled to the cadres of ruling parties.

According to Pyakuryal, Nepal´s public expenditure policy has been is riddled with structural problems from the very beginning.

“The transfer of funds from one heading to another can´t be done in normal situation,” said Pyakuryal, adding “The government should disclose all the facts and figures of such fund transfers and the opposition should give the government a chance to articulate their decision as per the democratic practice.”

The opposition parties have been blocking the parliament meeting since the start of the budget session on May 30. Incidentally, House obstruction was also the tactics used by the opposition parties as a way to voice their disenchantment with the decisions of past governments.

Another economist Dr Chandra Mani Adhikari, who is also a member of the National Planning Commission (NPC), said that there is no rationale behind fund transfers in the last quarter of a fiscal year, when there isn´t enough time to implement the project. “The government should always take the permission of parliament for spending taxpayers´ money,” said Adhikari.

Though it is widely known that government should be accountable to the parliament over the manner in which budgets are spent, in this particular instance the opposition parties, high-level sources said, are bargaining with the finance minister for allocation of budget to their respective constituencies.

Economist Dr Dilli Raj Khanal said that past governments had also transferred the budget as a last option of spending capital budget. “Transfer of budget from one heading to another is a cyclical problem caused by poor public expenditure policy,” Khanal said, adding, “It clearly shows the deep-rooted chaos that have come to besiege the norms, values and systems of public expenditure as well as the irresponsibility of the ruling parties.”

Budget transfer of Local Development Ministry since 2008/9 despite the absence of local governments

FY                                 Transferred fund (Rs in billion)

2008/9                         5.27
2009/10                       3.43
2010/11                       1.93
2011/12                        2.44
2012/13                        2.47
2013/14                        2.94
(Source: Ministry of Finance)

Source: Republica