November 18: Growing fiscal anarchism if shifted to province and local level will be disastrous, experts pointed out during an interaction program held in Kathmandu on November 16.

The programme ‘Public Expenditure System in Federal Structure: Opportunities and Challenges’ was jointly organized by Public Expenditure Review Commission (PERC) and South Asia Watch on Trade, Economics and Environment (SAWTEE) to discuss the complexities of public expenditure in the fledgling federal system, especially in the context of agricultural development.

Dr Dilli Raj Khanal, chairman of PERC pointed out that one of the biggest reasons for the mismanaged public expenditure was the tendency of starting projects without proper readiness in terms of planning, which created complications during implementation leading to unspent budget allocation.

Therefore he emphasized on spending substantial amount of time on planning and preparedness which would then ensure effective implementation.

Dr Posh Raj Pandey, executive director of SAWTEE, also cautioned that Nepal’s current expenditure allocation had been growing since some time and increased number of administrative units would further add to it. He pointed out that growing fiscal anarchism were shown by tendency of allocating budget without figuring out the sources of funds and projects being launched without completing necessary pre-requisites. Lack of preparation causes projects to suffer cost and time over-run making the administration inefficient, he said. He cautioned that lack of accountability in maintaining budgetary discipline may lead to provincial and local level governments replicating similar tendencies compromising their absorptive capacity.

He further added that the constitutional provisions of creating overlap between the responsibilities of different tiers of government may be a potential source of conflict. Similarly the imposition of export or business taxes in agricultural produce and the tendency to use agriculture related conditional grants to other sectors may hinder agricultural development.   

Referring to mismatched project prioritization and budget allocation, Balananda Poudel, former secretary and chairman of Local Bodies Restructuring Commission said that government needed to effectively implement medium-term expenditure framework even at provincial and local levels. He urged PERC to become proactive in questioning government and its entities at all levels on their expenditure policy and patterns to instill a sense of accountability.   

Participants included representatives of federal and provincial governments, including secretaries, joint secretaries; representatives of municipal and rural councils also shared their experiences. They emphasized that the lack of sufficient personnel and procedural confusion had created problem in service delivery thus creating inefficiency. Similarly, they also urged the federal government to set up a centralized and uniform accounting and reporting information technology for efficient and integrated system.