Draft bills on public finance mgmt soon: MoFThe Ministry of Finance (MoF) is forwarding drafts of two crucial bills required to manage public finance in a federal structure to the Cabinet as early as next week, albeit the government will not be able to refer to these documents to frame the budget of the next fiscal year as chances of them being signed into law anytime soon are very slim.
The Ministry of Finance (MoF) is forwarding drafts of two crucial bills required to manage public finance in a federal structure to the Cabinet as early as next week, albeit the government will not be able to refer to these documents to frame the budget of the next fiscal year as chances of them being signed into law anytime soon are very slim.
The MoF recently framed drafts of the National Natural Resources and Fiscal Commission Bill and the Intergovernmental Fiscal Transfer Bill and forwarded them to the Ministry of Law, Justice and Parliamentary Affairs for approval.
“Our officials are regularly visiting the Law Ministry and coordinating with officials there to finalise the drafts,” Finance Secretary Shanta Raj Subedi said.
Law Ministry Spokesperson Dilli Raj Ghimire said discussions on the draft bills are now almost over. “We will forward them back to the Finance Ministry as early as this week,” he said.
The Finance Ministry, according to Finance Secretary Subedi, will forward the draft bills to the Cabinet immediately after getting them from the Law Ministry, which could be as early as next week.
Upon getting a green signal from the Cabinet, the finance minister will table the documents in Parliament, where lawmakers will hold discussions before endorsing them.
“Discussions at Parliament are expected to be quite lengthy as these are crucial bills. So, we will not be able to refer to them to frame the budget of the next fiscal year,” Subedi said.
Passage of these two bills is crucial because they allow the government to distribute revenue among different levels of government in an equitable manner.
For instance, signing of the National Natural Resources and Fiscal Commission Bill into law will enable the government to form the National Natural Resources and Fiscal Commission. The commission will devise a formula for distribution of revenue among the federal, state and local governments; set parameters for distribution of grants to state and local governments; and propose debt ceilings for federal, state and local governments.
On the other hand, the signing of the Intergovernmental Fiscal Transfer Bill into law will allow the government to promote fiscal discipline and good governance, and ensure resources are distributed in a fair and equitable manner.
The government will also need the Intergovernmental Relations Act to manage public finance in a federal structure. This law defines relationship between government units at federal, state and local levels so that they could extend cooperation in a cordial manner. This legislative framework has to be framed by the Office of the Prime Minister and Council of Ministers. Officials at the Ministry of Finance are currently at a loss over budget formulation because of absence of these laws.
As a result, the ministry still has not been able to finalise budget for local bodies, according to Subedi.
As Nepal formally embraced federal setup in March by replacing different bodies in local, district, zonal and regional levels with 744 new local units, and district coordination committees, the government has decided to allow local bodies to formulate annual budgetary programmes on their own. This is a major shift from current practice where the central government plays a bigger role in finalising annual budgetary programmes for local bodies.
Based on this policy, the central government has decided to transfer funds required by local bodies to bank accounts of village and municipal councils, offices of sub-metropolitan and metropolitan cities, and district coordination committees. But the absence of the National Natural Resources and Fiscal Commission Act and the Intergovernmental Fiscal Transfer Bill has prevented the Finance Ministry
from allocating funds for local bodies.
Earlier, there was also confusion over budget formulation as the Election Commission had said fiscal policy should not be unveiled until the local elections are over. The government held first phase of local level polls on Sunday and is scheduled to hold the final phase of local elections on June 14.
On the other hand, the constitution has clearly mentioned that the budget should be presented in Parliament on the 15th day of the Nepali calendar month of Jestha, which falls on May 29 this year.
Considering this scenario, leading political parties have agreed to allow the government to introduce a partial budget on May 29 and a supplementary budget after completion of elections. This means the budget launched on May 29 would only give continuity to policies and programmes of the existing fiscal policy, barring the government from announcing new policies and programmes aimed at swaying votes. Chief Election Commissioner Ayodhi Prasad Yadav has also said his commission would not bar the government from launching budget on May 29 if it does not contain new policies and programmes.
“If this is the case, we will have to revise the budget ceiling and revenue collection target for the next fiscal year because we will not be able to change budgetary programmes nor revise tax and nontax rates,” Subedi said.
But again the possibility of suspension of the constitutional clause that makes it mandatory for the government to launch the budget on May 29 cannot be ruled out as a new government led by Nepali Congress is being installed as early as next week, a reliable source said, adding, “If that happens a complete budget would be unveiled after completion of local polls.”