Monday, 17 June, 2024

Challenges Of Local Budgeting

Mukti Rijal 

THE federal government presented its annual budget for the Fiscal Year 2020/2021 last fortnight which has drawn mixed response. Accordingly, the state governments are going to present their annual budgets next week which have been expected to focus on improving health infrastructures and economic recovery, among others, consistent with the priorities of the federal budget. Similarly, the local governments - Gaupalika and Nagarpalika - are getting prepared to present their annual budgets for the upcoming year. It seems that local governments are going to prepare their annual budgets and doing necessary consultations to that end. The local governments have to align their priorities and programmes with those of the federal and state budgetary provisions.
The Ministry of Federal Affairs and General Administration (MoFAGA) has also directed the local governments to improve agricultural productivity through measures announced in the federal budget. According to the provision of the constitution, 753 local governments are required to endorse their respective annual budgets through local parliament during the next fortnight. Since the constitution has fixed the time line for presentation and ratification of the annual budget for three levels of the government, the state and local governments are hard pressed to undertake it despite the fact that the growing corona infections is exacting heavy toll on their resources and capacities.
For the ordinary people, needless to say, local budget is very important as its provisions and allocations contribute to cater to their immediate needs and interests. The major advantage of the local budget is that its financing decision can be made closest to the local people to respond to their preferences. Moreover, citizens’ inputs can be included through consultations and hearings while budgetary allocations are made. Compared to state and federal governments, the local ones can better solicit the people’s inputs and suggestions regarding their programmes and budget.
From citizen participation and engagement point of view, local budgeting process is very important. John L. Miksell, a noted public finance expert, has mentioned that local budgeting decisions are made through real sovereign choices. The citizen has a better chance of influencing democratic process and the budgetary choices emerging from it when decision makers are closer and more accessible. Empirically, it is proved that when budgetary decisions are made closer to the citizens, the public is likely to keep careful track of services and taxes to finance them. Moreover, citizens can raise and communicate their needs, interests and concerns to government representatives and officials and keep vigil as budgetary decisions are put into practice. Since local people can keep constant watch on the implementation of budgetary programs, they can provide immediate feedback.
Local government experts emphasise that the citizens are more inclined to accept tax payments if they find a clear link between tax and improved public service delivery. It is said that when taxes are levied and raised at the federal level, the link between tax payment and access to service is difficult to see. It is because amount raised through tax payment disappears into the national treasury without having identifiable consequence or impact on tax payers. Local citizens as tax payers will therefore be a greater contributor to the local budget. When it comes to monitoring and evaluation of local budget implementation, it is easier for citizens to assess as they are directly influenced by the results that are produced by it. There is little need for sophisticated measurement tools and instruments to judge the success of the services. Local citizens are influenced by services they receive and can reach easy conclusions about their quality and reasonableness.
The important aspect of the local budgeting is that local citizens can be involved in each stage of the process which is a means of making the government responsive to public interests and a methodology of monitoring government programmes. According to Mikesell, several significant aspects need to be paid attention to make budget citizen-friendly including that the financial data must be arranged in ways that are meaningful to citizens. Moreover, it needs to be prepared in a way that is accessible to the citizen and must communicate the core responsibilities of the officials.
Against this backdrop if local budgeting process in Nepal is taken into account, the Local Government Operation Act, 2017 and government guidelines stipulate provisions regarding citizen consultation while making budgetary decisions. Moreover, provisions exist for fiscal discipline including adherence of the financial transparency and accountability. However, it is discouraging to note that around eleven out of seven hundred fifty three local government entities had failed to get their annual budget endorsed in local parliament in line with the time line specified by the constitution last year. This has resulted in hampering the formulation and implementation of the local development plans. It is expected that the local governments will not fail in producing and ratifying their annual budget for the upcoming year as this will not only call into question their rationality and legitimacy but also impede the process of local development.
Similarly, questions have been raised about the efficient and effective use of budgetary allocations as local governments in some cases are found failing to uphold fiscal discipline and norms. It is reported that mistrust between the elected officials and local bureaucracy has increased, with each accusing the other of non-cooperation. In some instances mayors are found complaining that officials obstruct implementation of committee decisions, thereby hampering the smooth operation of local government. Be that as it may, as elected local government representatives have already completed three years of their tenure, they are expected to deliver better during rest of the two years so that their prospects returning to the office again would be higher.

(Rijal, PhD, contributes regularly to TRN and writes on contemporary political, economic and governance issues.