‘Ideally budget should be announced on May 29’Going by the constitutional provision, the government has less than a month to present the next fiscal year’s budget in Parliament. But it appears the Ministry of Finance has not made adequate preparations to launch the fiscal policy on time largely because of confusing statements from political parties.
Going by the constitutional provision, the government has less than a month to present the next fiscal year’s budget in Parliament. But it appears the Ministry of Finance has not made adequate preparations to launch the fiscal policy on time largely because of confusing statements from political parties. Opposition parties fear that introduction of the budget prior to the second phase of local level elections could influence poll results. Also, absence of certain laws that enable formulation of the budget in the newly-introduced federal system has emerged as a hurdle for the government. Rupak D Sharma of The Kathmandu Post caught up with Finance Minister Krishna Bahadur Mahara on the sidelines of the Asian Development Bank’s 50th annual meeting in the Japanese city of Yokohama on Saturday to discuss the issue. Excerpts:
What kind of preparations is the Ministry of Finance making to introduce next fiscal year’s budget?
The Ministry of Finance is currently holding discussions with former finance ministers and secretaries. We are also holding discussions with experts, while discussions with the private sector has concluded. However, politicians have not been able to forge a consensus in this regard. As per the constitution, we have to introduce the budget on the 15th day of the Nepali calendar month of Jestha (which falls on May 29 this year). Based on this provision, the Finance Ministry is making preparations to present the budget in Parliament on that day.
This means the budget will be presented in Parliament on the date stipulated by the constitution, isn’t it?
There is some uncertainty in this regard, because we are holding second phase of local level polls on June 14. There is a school of thought that says the election code of conduct would be violated if budget is introduced before the second phase of the local polls, as it would influence voters. But there is another school of thought that says constitutional provision must be honoured and budget should be introduced on Jestha 15 (May 29) as stipulated in the charter. Some are also saying that the constitutional provision be suspended for this year so that budget could be introduced after the completion of the second phase of local polls. In spite of these uncertainties, the Finance Ministry has started formulating the draft of the budget for the next fiscal year.
Have you discussed these issues with the main opposition party, CPN-UML, and others?
Opposition parties think introduction of the budget prior to the polls would influence election results. This is a genuine concern. And we are ready to suspend the constitutional provision on budget presentation for this fiscal year. But an agreement in this regard must be reached at the earliest. We are making efforts to strike a consensus on this issue. I hope we will be able to agree on something soon.
Some are also saying suspension of the constitutional provision on budget presentation would set a bad precedent as it would encourage other parties in future to resort to this measure whenever there are uncertainties. What is your take on this?
This concern is also genuine. I am all for introducing the budget on the day stipulated by the constitution. Budget formulation, in fact, is a regular process and is a means of encapsulating people’s aspirations. Since it is the responsibility of the government to introduce the budget every year, I don’t think it would violate election code of conduct.
Recently, the Election Commission had made a statement saying introduction of budget prior to the elections would not violate the code of conduct, isn’t it?
Yes, the Election Commission initially said introduction of the budget prior to the polls would not be considered as violation of the code of conduct, as the constitution has given mandate to the government to launch the fiscal policy on Jestha 15. But the commission later issued a statement saying the code of conduct may be violated. So, the commission itself is not very clear on this issue. Besides, the commission should have honoured the constitutional provision and not made statements that go against the charter’s spirit. In my opinion, budget is a national programme and is introduced every year. So, barriers should not created this year.
The Finance Ministry is also facing some problems in budget formulation because of the absence of the National Natural Resources and Fiscal Commission Act and the Intergovernmental Fiscal Transfer Act, isn’t it?
We are still in the process of implementing federal system of governance. We are holding local level elections this year, following which elected representatives will join the local bodies. As mentioned in the constitution, the central government will have to financially support these local bodies. Currently, around 50 percent of the programmes developed for the local level by various ministries are implemented by local bodies. So, this time, we will be giving authority to local bodies to frame these programmes.
This means local bodies will soon be able to frame their own budgetary programmes. With regards to budgetary support for the provincial governments, the central government will have to implement budgetary programmes on their behalf this year, as state governments are yet to be formed.
So, the responsibility of budget formulation will be partially devolved this year, as the federal system of governance is yet to fully come into effect.
So, how is absence of the National Natural Resources and Fiscal Commission Act and the Intergovernmental Fiscal Transfer Act affecting the budget formulation process?
The picture would have been a lot more clearer had these laws been introduced. We have already prepared drafts of of these laws. They have been forwarded to the Law Ministry. They will be tabled in the Cabinet as soon as the Law Ministry sends them back to us.
How is the Finance Ministry planning to distribute revenue across three levels of the government in the absence of the Natural Resources and Fiscal Commission?
The constitution has said that revenue has to be distributed across federal, provincial and local governments. But we still have not been able to derive a formula for allocation of these resources. However, we are working on this front.
Will a decision on allocation of resources be taken by the Finance Ministry or at the political level?
This is a new issue for us. So, there is confusion. But matters will start becoming clearer once relevant laws are framed. We are still holding consultations at all levels to resolve this issue.
Lastly, what will be the highlights of the new budget?
Nepal has to focus on development of physical infrastructure. This statement may sound like a cliché, but this is the reality, because we cannot develop the country unless there are good transport and energy networks and other infrastructure. The budget will focus on development of these areas. We will also focus on development of agricultural and industrial sectors. On top of all these, priority should also be given to development of the social sector so as to deliver quality health and education services.