Tuesday, 3 October, 2023

Budget And Its Governing Principles

Mukti Rijal

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel read out the budget statement promulgated through ordinance last week. The budgetary principles and allocations have been appreciated from different sectors though there is objection from the opposition on the ground that the caretaker government should not have promulgated the budget of the scale of please all expansionary type since the election is on the card, of course, subject to judicial review. The budget has envisaged some targeted allocations which may definitely win tilt of the people to the side of the incumbent government in case the elections have been held at the stipulated dates.
To cite few instances, one can mention that a jump increase in the senior citizen allowance will have a favourable consequence though this allocation should not be contested from social security point of view. Moreover, the targeted programmes towards income generation of women belonging to marginalised communities, using hotels as isolation centres with government incentives, 20 per cent reductions on all purchase of rice, sugar, salt, flour, lentils, cooking oil, LPG gas from Salt Trading Company, grant to be allocated to the students, concession on the tariff for consumption of electricity and so on have been some of the allocations that are geared, if effectively implemented, to reach direct benefit to the people.

Fiscal federalism
Another strength of the budget has been the greater attention focused on strengthening fiscal federalism in line with constitutional framework. The budget has followed the formula prescribed by the National Natural Resources and Finance Commission on fiscal transfers. Accordingly, Rs. 57.95 billion has been allocated under the heading of equalisation grants to the provincial governments while Rs. 94.56 has been set aside for the local governments. In the same way, Rs. 35.87 billion has been provided to province and Rs. 173.50 billion to the local governments as part of the conditional grant transfers.
Likewise, in regard to supplementary grant Rs.12.37 billion has been allotted to the Pradesh (state) governments while Rs.12.46 billion has been given to local governments. In the same spirit, arrangements for financial transfer through conditional grant has been set aside for the projects to be operated with the co-investment of federal, provincial and local levels.
The budget has estimated Rs. 126.69 billion at the provincial and local levels as part of revenue sharing. According to all calculations, more than 25 per cent of the budget has been allocated for the sub-national government.
The budget has moved forward the concept of Bhumi Bank stipulating that at least 50 branches of it will be established in each province and brought into operation within the upcoming fiscal year with the joint collaboration of local and federal governments. Once the concept of Bhumi Bank is implemented, arrangements will have to be assured to make land available on lease to individuals, groups or institutions for commercial farming and processing of agricultural produce on private, government, public and river uplift lands which are not in use and lying wasted without any productive utilization. A few provisions and allocations mentioned above show that the budget holds out promising outlook if the budgetary provisions are implemented in the honest spirit of the term.
However, for a budget to be effective, it must first be aligned with the country's development long term strategies while establishing a stable, sustainable fiscal position for the medium term and beyond. The budget should not only facilitate the shift of resources to more effective, higher priority areas but also be accessible to citizens and responsive to their interests. This shows that assuring accountability in the expenditure of public money is very important. Moreover, other aspects of good budgeting include strong financial control system, independent audit and greater focus on delivery of outcomes.
Moreover, efficiency in the management of resources is very crucial to warrant that inputs are minimised and outputs maximised. Effectiveness is simply the extent to which budget objectives are achieved since budget outcome should be linked to growth with citizen welfare. Effectiveness is more difficult to assess than efficiency, since the budget outcome is influenced by political choices. However, the ultimate goal of budgeting is to improve the lives of the people and if a budget does not lead to improvement in the lives of the people, it does not qualify as being a good and effective budget.
Budget discipline is also very important to ensure that the government stays within the limit of its provision. The ability of a government to confine itself to the limit of expenditure in the approved budget is also an important requirement. It includes an adherence of budget calendar in its development, approval, implementation and monitoring tasks.

Public budgeting
Accountability is realised when the government decision-makers become responsible for their actions. In relation to public budgeting, accountability demands that the budget holders give a vivid and convincing account of how budgetary allocation were used and utilised. Accountability also entails the fact that if public resources are misused by service providers, there must be mechanisms for recovering them from those who made such abusive decisions. Besides, good budgeting requires sound institutions governing the budget allocation and execution system that operate within the rule of law.
However, in the context of Nepal, good budgeting principles mentioned above are rarely followed as result budget efficiency and effectiveness is very poor. Efforts should, therefore, be put in ensuring accountability of those involved in budget formulation and implementation to produce results for the greater good of the people.

The author is presently associated with Policy Research Institute (PRI) as a senior research fellow. rijalmukti@gmail.com)