Three years on, provincial governments doing poorly in budget implementation

Kathmandu, June 19

Provincial governments have failed to show much progress in spending the budget they prepare and announce year after year and are unlikely to perform better anytime soon in absence of radical steps.

In the 10 months of the current Fiscal Year 2020/21, no province has utilised more than 40 per cent of its budget, according to their budget speech presented last week at the respective Provincial Assembly.

Although most of the provinces have stated that their total budget mobilisation would surpass last year’s record, statistics for this year are not encouraging as their projection of total spending is below 75 per cent of the estimated expenditure.

Karnali Province’s budget expenditure estimation for this Fiscal Year 2022/21 is only 46.4 per cent of the total allocation of Rs. 33.74 billion. Experts said that with this meager spending, it would be difficult to achieve the human as well as economic development targets.

Budget for FY 2020/21 and expenditure estimates

Province	Budget size  (Rs. in billion)	Expenditure  estimate (%)
Province 1	40.89	60
Province 2	33.56	62.5
Bagmati	51.42	74
Gandaki	34.84	NA
Lumbini	36.35	NA
Karnali	33.74	46.4
Sudurpaschim	33.38	72.6

Source: Provincial budgets

If one should believe in the estimates of the provincial governments, Bagmati, Lumbini and Sudurpaschim provinces would register the highest budget mobilisation this year. Bagmati Province budget mobilization is estimated at about 74 per cent of the total allocation. It has utilised only 38 per cent of its budget in 10 months of the current FY.

Lumbini Province has mobilised about 57.35 per cent of its budget by mid-June, a month before the FY concludes in mid-July. As the culture to spend large chunk of development budget in the final months of the year spreads to the provinces as well, hopes are high that Lumbini would make better spending.

Likewise, Sudurpaschim has hopes of mobilising 72.6 per cent of from the current year’s budget. Province 1 has mobilised 40 per cent of its budget in 10 months and estimates to spend as much as 60 per cent by the year end.

Province 2’s budget spending is expected to reach 62.5 per cent, as mentioned in the budget speech of the coming Fiscal Year 2021/22.

Similarly, Gandaki Province has mobilised about 37.76 per cent of the total budget in the 10 months of the current fiscal. It is up by 22.76 per cent compared to the previous FY. It has not announced the estimate for the total budget mobilization.

COVID-19 an excuse

All the provincial governments said the main reason behind poor budget performance is the COVID-19 pandemic. For example, Minister for Economic Affairs and Planning of Karnali, Gopal Sharma, said that both the capital spending and revenue mobilisation are affected by the pandemic.

However, experts, administrators and private sector say that the provinces are weak at project preparation and monitoring.

Dr. Shanta Raj Subedi, former Finance Secreatary, said that the provincial budgets have become the victim of high aspirations without proper foundation and capacity.

“Provinces lack key infrastructure to mobilse the budget, qualified human resources and organisational structure. It seems that the weaknesses and challenges at the federal government have been transferred to the provinces,” he said.

Dr. Subedi also mentioned the political bickering, distributory budget, and lack of project preparedness for the poor budget performance.

 

Tokenism

Provinces primarily lack the expertise or seriousness in project preparedness. They are scattering the resources to many projects, most of them small or medium, instead of focusing on a few key programmes.

“Tokenism is in practice in the provinces. It seems that they want to make everyone happy with many projects but execution is poor. There are problems in following the fundamental principles of budget,” said Economist Dr. Dilli Raj Khanal who once led the Public Expenditure Review Commission.

According to him, there is a trend to allocate budget haphazardly and failure to implement the programmes. To take an instance of distributory programme, the Election Constituency Development Programme is given continuity in the provinces, except in Lumbini, although the federal government has scrapped the scheme from the next fiscal year.

 

 

Lack of focus

Private sector has felt that the subnational governments lack infrastructure and trechnical expertise to mobilise the budget in time and to the full capacity.

“They stick their hands in multiple projects and none is delivering good results. Likewise, poor allocation is another problem. They allocate just about 7-10 per cent of the total project cost even in a medium project worth Rs. 800 million,” said Rabi Singh, President of the Federation of Contractors Associations of Nepal (FCAN).

Finance Secretry Shishir Kumar Dhungana attributed poor budget mobilisation of the provinces to the lack of allocative efficiency. According to him, budget allocation should be made after a thorough study and preparations which demands technical human resources as well as the capcity on the part of the subanational governments.

 

Human resource adjustment

Although the provinces have been demanding to provide sufficient technical and administrative manpower, the federal government has failed in addressing their demands.

The government at the centre has failed to complte employees adjustment in time. Even after three years of the creation of provincial structures, none has got the required human rsources, said Dr. Subedi.

He said that the federal government should immediately hand over the structrues to the provinces and help in increasing their capacity in project preparedness and budget mobilisation.

According to Singh, provincial governments should pay enough attention to project preparedness, increase human resources for monitoring and evaluation of the programmes and allocate sufficient budget for the projects in progress.

Dr. Khanal also suggested focusing on preparedness and implementation as well as to intensify the monitoring of budget spending.

Meanwhile, the federal governmant has tried to address the manpower problem through the budget of the coming FY 2021/22. Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has announced in the budget that the recruitment of employees will be conducted twice a year against the current practice of hiring once a year.

Dhungana said that the complain about lack of sufficient human resource is a valid one and activation of the provincial Public Service Commission would be a major step towards solving the problem.

“However, it is the responsibility of provinces to mobilise the budget they make considering their weaknesses and available resources. They must not be blaming others for it,” said Dr. Subedi.

 Published in The Rising Nepal daily on 20 June 2021.