The government is drafting the “Fiscal Responsibility Act” to guide the whole budget making process and its implementation to realise the budget goals.

Currently, the Appropriation Act guides the budget making process which only talks about the resource allocation.

The Finance Ministry has started homework to prepare the document. Chief of the ministry’s budget division Baikuntha Aryal said the draft Act is being prepared to bring efficiency in both budget making and implementation processes.

“The Act will have provisions including how to ensure maximum spending of the budget and what actions are to be taken against government agencies and projects that only accumulate budget without spending,” said Aryal. “The expected result from the introduction of Act is the budget is realistically formulated and targets are met.”

He said the Act will also talk about reducing off-budget expenditure while increasing allocated resources.

Due to increased demand of off-budget expenditure, the country’s track record in fiscal accountability has remained poor. There has been a trend of allocating resources for projects which are included in the budget under political pressure.

Aryal said the ministry has targeted to introduce the Act within this fiscal year and prepare the budget as per the new Act. The ministry plans to introduce the budget for this fiscal year as early as mid-May as capital expenditure has remained poor for last five years due to either delayed budget presentation or delayed endorsement. However, the delay in the formation of a new government is likely to hit the ministry’s plan.

With political confrontation already beginning over power sharing, when the new government will be formed is not clear. The Election Commi-ssion is yet to declare candidates elected under the proportional electoral method. As per the Interim Constitution provision, the Prime Minister has to call the first CA meeting within 21 days after the final declaration of election results. The protracted row over who should call the first meeting between the Prime Minister and the President has now been resolved with the two power centres agreeing that the Prime Minister will call the first meeting.

Aryal said if the government is formed within mid-February, the ministry can prepare the budget for mid-May presentation. The National Planning Commission is yet to forward the budget ceiling to the government although it has already sent the ceiling for district-level projects. The size of the ceiling set for local-level projects stands at Rs 98.72 billion. The Finance Ministry is currently working on two documents for budget preparation—budget preparation guideline and working procedure directive. These two documents will guide the budget preparation for the next fiscal year.