Government faces financial deadlock as budget fails to get through ParliamentA shutdown situation as no spending allowed and further delay could lead to a crisis.
The obstruction of the House of Representatives by the main opposition CPN-UML on Tuesday has led to a government shutdown situation, as the day’s meeting was adjourned without passing the budget replacement bill. The deadline for its passage is Wednesday but the next meeting has been scheduled for coming Monday (September 20).
With the budget still stuck in the lower house, Finance Minister Janardan Sharma said spending could be affected “for five to seven days”.
However, concerns have grown if the spending could be hobbled for a longer period of time with the main opposition insisting on not allowing the House to function until its demand is met.
Bureaucrats who have worked in the Finance Ministry in the past say this is probably the first time the country has faced such a financial deadlock, with a complete bar on spending.
“If my memory serves me right, this is the first time the government has faced such a situation in which it cannot spend a single paisa,” said Ram Sharan Pudasaini, who recently retired as a revenue secretary from the Finance Ministry.
With the replacement bill failing to pass the lower house on time, all government spendings would come to a halt from Wednesday night.
The budget for the fiscal year 2021-22 was brought by the erstwhile KP Sharma Oli government on May 29 through an ordinance, as the House had been dissolved on May 21, amid criticism. But on July 12, the Supreme Court not only restored the House but also ousted KP Oli, asking the President to appoint Nepali Congress’ Sher Bahadur Deuba the new prime minister.
The Deuba government presented the budget ordinance in the House on July 18. Then a replacement bill was tabled at the House to replace the ordinance on appropriation on September 10.
As per the parliamentary rules, a replacement bill of any ordinance should be endorsed by both houses of Parliament within 60 days of the tabling of the ordinance. The deadline expires on Wednesday (September 15).
Ever since the new House session began on September 8, the main opposition UML has resorted to obstructions, accusing Speaker Agni Sapkota of failing to fulfil his duty as an independent presiding officer.
As the 60-day deadline for passing the ordinance was nearing, the government was under pressure, but the UML refused to relent. The UML, which has alleged that the Speaker played a complicit role in splitting the party by sitting on its recommendation to expel 14 dissident lawmakers, got enraged further on Friday after Sharma presented a bill to replace the budget ordinance by making some changes to the earlier budget, amid sloganeering from the opposition lawmakers.
After the UML did not allow the House to function on Sunday, Speaker Sapkota called an all-party meeting on Monday. The UML boycotted it.
As soon as the House meeting began on Tuesday, the Speaker allowed discussions on the replacement bill. No lawmaker participated in the discussion, except Prem Suwal, a member of the lower house from Nepal Majdoor Kisan Party. After that, the Speaker adjourned the House for September 20.
According to officials and experts, the government had two options—either introducing a vote on account bill to spend a maximum of one-third of the total estimated expenditure or ending the current session of Parliament so as to create a situation for introducing the same budget again as ordinance.
But Finance Minister Sharma told journalists after the House meeting that the government won’t present a vote on the account bill (advance expenditure) nor will it bring a new ordinance.
“With the meeting of the lower house adjourned, a vote on account bill cannot be presented,” said Pudasaini. “There is no room for a new ordinance as long as the House is in session.”
The failure to get the budget through the House comes as yet another setback for Deuba who has been facing criticism for not being able to expand his Cabinet even two months after assuming office.
Given the strengths of his party and the coalition partners in both the houses, passing the replacement bill should not be an issue, provided that the UML allows the proceedings.
The UML appears to have issues with the Speaker rather than the budget. Sapkota was appointed Speaker in January last year after a months-long tug-of-war between Oli and Pushpa Kamal Dahal, who jointly co-chaired the then Nepal Communist Party (NCP).
Now with the Nepal Communist Party (NCP) invalidated and the UML and the Maoist Centre revived to their pre-May 2018 statuses, Oli and Dahal are each other’s adversaries. Oli sees Sapkota as Dahal’s henchman rather than an official presiding over the House. The UML still considers Speaker Sapkota’s refusal to issue a notice as per the party’s decision to expel 14 lawmakers, including Madhav Nepal, as a ploy to split the party. Madhav Nepal registered a new party, CPN (Unified Socialist), on August 26, which is backing the Deuba government.
Now with the budget stuck in the lower house and the government staring at a financial crisis, some say a new ordinance could be an option to break the deadlock.
A Finance Ministry official did not rule out the possibility of a new ordinance.
“That’s an option but I don’t think the government will bring an ordinance, as the next meeting of the House has been scheduled for September 20 with the replacement bill already owned by the House,” said the official who spoke on condition of anonymity. “Failure to spend money for three-four days won’t make much difference if the replacement bill is endorsed.”
There, however, are concerns about the impact of the government's inability to spend money, especially amid the Covid-19 pandemic and ahead of the Dashain festival.
“At this time of the global pandemic, the government must be able to spend even to avoid humanitarian disasters,” said Pudasaini.
The delay in endorsing the spending bill will also severely hamper development activities, according to officials and experts.
“It will be difficult to award new contracts,” said Pudasaini. “The bills for the completed tasks cannot be settled.”
The current situation has left officials at the Finance Ministry distressed.
“We are very much worried about the latest situation and it’s up to the political parties and Parliament to take a call,” said the ministry official who spoke on condition of anonymity. “If there’s a further delay, the government might have to borrow, especially when it comes to immediate procurement, which will lead to arrears and unsettled bills.”