Ethics in utilising public purseNepal’s legal and institutional frameworks can yield expected results only with ethical approaches.
Oriental philosopher and statesman Chanakya is well-known for his ethical disposition while utilising public funds. In a famous allegory, he used two lamps while working–one for public work and another for personal. The lamp that used public fuel was never used for personal work. Public coffers, the prime source of government funding, carry people's expectations towards a nation’s prosperity and happiness. An ethical approach to public coffers demands utilising the funds with the right intention while strictly adhering to legal provisions. Deviation from this opens the way for misappropriation, misutilisation and underutilisation of public funds, hampering noble development initiatives. So, the ethical aspect of public funds should be a prime concern for all governance stakeholders and the government.
In Nepal, public funds comprise tax and non-tax revenue, official development assistance, loans, revenue from public enterprises and government income from various sources. Each tier of the government has the statutory provision of federal, provincial and local-level consolidated funds. There is also the provision of divisible funds—owing to the 2017 Intergovernmental Fiscal Management Act’s provisions for intergovernmental funds transfer in the respective tiers. In the broader sense, public funds also include trust and community funds established for wider public welfare. The government’s budget cycle paves the way for the primary utilisation of public funds. Proper execution of the nation’s budget cycle provides a conspicuous ethical picture.
As per statutory provisions, all three tiers of government are involved in the activities of the budget cycle. The effectiveness of the annual budget and programmes contributes to the national development priorities, which sprout from the ethical disposition while implementing plans and policies. Nepal’s public fund scenario is widely criticised for its inefficient allocation, misappropriation of funds, perennial low capital expenditures, revenue leakages, implementation inefficiencies, favouring special interests and inadequate oversight and monitoring. The ethical lines get expunged from the very process of budgetary allocations, drawing perpetual criticism of prevalent pork barreling in all tiers of government. The big concern on ethical grounds is the manipulation of budget allocation by influential leaders and sitting ministers to their home districts.
The implementation deficit of budgetary allocations also raises ethical questions. Frequent and untimely transfer of project officers, political favouritism in transfers, inefficient and delayed bidding processes and capacity constraints heavily hit the budget implementation. Midway budget transfer to unrelated sectors is common in Nepal despite the Ministry of Finance controlling it. Implementation constraints emerge from the personnel’s ethical lapses and political influence, deterring the placement of the right man in the right place. Capital expenditure—a yardstick to measure the progress of implementation—suffers due to ethical lapses in implementation arrangements. For instance, around 62 percent of capital expenditure in the fiscal year 2022-23 and an average below 70 percent in the last 10 fiscal years demonstrate a gloomy picture. Moreover, perennial hasty spending at the end of the fiscal year raises serious ethical questions and demands a proper review of capital expenditure trends in Nepal.
Monitoring and reviewing have been neglected for far too long in Nepal’s budget execution. Although periodic budget review exists, it applies a general perspective rather than project and programme-specific review and feedback. Monitoring practices are oblivious to ethical dimensions and are plagued by uncertain ritualistic routines that rarely incorporate feedback implementation mechanisms. Project site monitoring that demands institutional intervention is sometimes guided by populist paradigms, with sectoral ministers’ site visits resulting in unrecorded on-field directions to implementation units, neglecting systemic feedback implementation. Institutional monitoring is criticised as paperwork rather than indicator-based intervention and feedback. Budgetary review, which is supposed to focus on implementation progress mainly, is sometimes lost in the annual budget’s amendment because of unrealistic projections of income and expenditures. Moreover, the reduction of 13.59 percent in the fiscal year 2022-23 budget demonstrates the recent scenario of populist agendas guiding budget preparation and execution, neglecting ground realities, leading to unethical injustice to the entire budget cycle.
Though Nepal’s public purse utilisation has encountered many problems, including ethical lapses, there are silver linings, especially for the ethical ecosystem. Financial Procedure and Fiscal Accountability Act, 2019, which came into effect after Nepal embraced federalism, prescribes a systemic budget formulation procedure that makes mandatory provision for a medium-term expenditure framework (MTEF), a three-year rolling budget system, which has to reconcile with annual budget and programmes. The Act also provisions the concept of a project bank where evidence-based projects with techno feasibility studies and detailed project reports are listed for budget allocation. The practice of project banks, MTEF and prioritisation of development activities into priority 1(P1), P2 and P3 for budget allocation purposes intends to deter pork barrelling. Similarly, the line ministry budget information system, provincial budget information system, sub-national treasury regulatory application and computer-based government accounting system are the measures to smoothen the budget cycle in different government tiers in Nepal.
The Right to Information Act, 2007 has a mandatory provision of trimester proactive disclosures by government agencies, thereby ensuring transparency in utilising public funds. Easy access to daily receipts and payment status on the financial comptroller general office website shows the government’s efforts towards transparency in public funds. Aside from this, anti-corruption and good governance-related acts and practices like public hearings are essential steps towards transparency and accountability.
Despite the efforts, the ethical ecosystem in Nepal’s public fund utilisation encounters an unconducive socio-political environment of ethical deterioration. Legal and institutional frameworks can produce expected results only when ethical conscience permeates our activities. The beauty of law is replicated in its implementation with the right intention, not in its disregard. Political leaders, bureaucrats and the general public, including other governance actors, need to internalise ethical values, thereby creating a conducive ethical environment. The public profile of leaders should be channelled to promote moral values. Decisive policy intervention towards initiating and designing ethics-related curricula from the school level can inculcate moral behaviours in students who are the nation’s future pillars. Enhancement of moral authority in words and actions is what Nepal is lacking at the moment. An ethical environment filled with moral and ethical values should be Nepal's prime priority to enhance society's depreciated moral consciousness.