Friday, April 20, 2012

Budgetary system victimised

The budgetary system has become a victim of financial indiscipline, myopic vision and inconsistency as well as donor driven priorities, according to experts.
"The protracted political transition has further aggravated the challenges," said former economic adviser of the Finance Ministry Keshav Acharya, presenting the public sector perspectives on 'Issues and Challenges of Budget 2012-13', here in the valley.
Nepal is on the eve of presenting its 62nd budget that is going to be above Rs 429 billion, in three months. "Though the country has a long and rich experience in drafting and implementing the budget, it has been failing to deliver its promises to the people mainly due to political intervention," he added.
"The budgetary system, non-budgetary expenditure, public procurement, treasury management, accounting system, management of property, and pension and irregularities, and settling dues are major issues in public expenditure management that need to be addressed in the next budget," Acharya added.
On one hand, the country is passing through a phase of unabated acceleration in the size of current expenditures to as high as three-fourths of the total expenditures, and on the other, capital expenditure — that could not only create employment but also bring vibrancy to the economy — is suffering from the problems of delayed and lethargic implementation and gradual erosion in the government's capacity to spend, he said, adding that capital allocation is often deviating from the basis of cost-benefit and risk return analysis. "Prioritisation still continues to deviate from impact or result orientation."
The government should prioritise four sectors — capital market, apartments, hydro and real sector — and ease their regulatory frameworks to attract investments from Non-Resident Nepalis (NRNs) and make those sectors foreign direct investment friendly, suggested entrepreneur and CA member Rajendra Khetan.
Similarly, the government should concentrate on trade facilitation, infrastructure, procurement, most-favoured nation status and harmonisation rules and tariffs, growth of real sector and establishment of Export House, access to finance in rural areas and establish a commission on natural resources in the fiscal policy, he suggested.
Vice chair of National Planning Commission (NPC) Deependra Bahadur Kshetry, on the occasion, opined that the government faces a challenge to meet unlimited expectations of the people but has limited resources. "But the budget for the next fiscal year will focus on inclusive growth with employment generation," he said, adding that the budget will not be scattered but will concentrate on national priority projects. "Its main thrust will also be able to stop misuse of funds."
Though the budget is a powerful instrument at the disposal of the state with the power and clout to influence the deliveries that are committed in the constitution, laws, perspective and periodic national and sectoral plans, and manifestos of the political parties, it has been failing the people.
Through its allocation and resource mobilisation functions, budget influences consumption, saving and investment decisions at large but the budget has failed also due to open and unregulated border that has fuelled the informal economy that is as big as the formal economy and due to the weakened fiscal policy and monetary policy.

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