The government has introduced new provisions regarding the budget formulation process through the Financial Procedures and Fiscal Responsibility (First Amendment) Ordinance. The ordinance, recommended by the Council of Ministers last Friday, was issued by President Ram Chandra Poudel on Monday. Alongside this ordinance, President Poudel also issued three other ordinances: the Ordinance to Amend Some Nepal Acts Related to Promotion of Good Governance and Public Service Delivery-2081, the Privatization (First Amendment) Ordinance-2081, and the Ordinance to Amend Some Nepal Acts Related to Economic and Business Environment Improvement and Investment Promotion-2081.
According to Shailaja Regmi Bhattarai, spokesperson for the Office of the President, the ordinances were issued under Article 114, Clause 1 of the Constitution and took immediate effect.
The Financial Procedures and Fiscal Responsibility (First Amendment) Ordinance introduces several changes to streamline the budget formulation process. The National Planning Commission, in coordination with the Ministry of Finance, must prepare a preliminary estimate of resources available for the next three years and the expenditure limits by February of the current fiscal year. Subsequently, the Resource Estimates Committee is required to submit its report, including resource estimates, expenditure limits, a three-year budget outline, medium-term expenditure structure, and details of resource allocations for national pride projects, to the Finance Minister by Falgun 7 (February 19 this year). Based on this report, the Ministry of Finance must finalize budget formulation guidelines and limits by Falgun 15 each year (February 27 this year).
The ordinance allows adjustments to the proposed budget based on resource availability, expenditure needs, and spending capacity. Significant changes to budgeted programs or activities must be communicated to the concerned accounts officer. Programs under the approved budget can also be amended, transferred or reallocated to other activities within the same program upon recommendation by the relevant ministry. Additionally, ongoing projects funded by foreign grants or loans can receive resource reallocations without increasing the total foreign assistance approved in the Appropriation Act.
The ordinance addresses disaster management funding by enabling ministries or central bodies to include additional programs or activities for disaster response within the total annual budget limits. The Ministry of Finance will distribute funds from the Federal Consolidated Fund to provinces and local levels as per existing laws. Additional funds for mandatory liabilities, such as salaries and allowances, can be transferred as conditional grants upon recommendation by relevant ministries. Any unused grant funds must be returned to the Federal Consolidated Fund within the same fiscal year.
On auditing and accountability, the ordinance mandates that recoverable amounts be audited once supporting documents are submitted. The Office of the Auditor General is required to deduct these amounts and report the deductions to the Public Accounts Committee and the concerned accounts officer within seven days.
