Provinces perform miserably in budget planning and implementation

11-month progress stands only at 45%

 

Kathmandu, July 1

Provinces have largely failed to live up to the citizens' expectations in the management of public finance and implementation of development works.

The 11-month statistics of budget utilisation of seven provinces portray a dismal face of the sub-national governments that have been drawing continuous criticism for their very presence right since their creation about eight years ago in 2015 with the promulgation of the new federal constitution.

While they are in need to rationalise their presence in the new federal system, their poor financial and development performance and frequent changes in the government have a detrimental impact on the prosperity of the provinces. Meanwhile, a new political party, Rastriya Swatantra Party, has emerged with its principle against the provincial setup.

By mid-June 2023, with just one month of the current Fiscal Year 2022/23 remaining, average budget mobilisation of provinces is just 44.4 per cent with only one province utilising more than 50 per cent of its annual budget, according to the data collected through the budgets of the provinces and from their ministries of economic affairs and planning, and treasury control offices. 

Utilisation of development budget has crossed the 50 per cent mark only in Koshi Province by the end of the 11 months of the current FY while Madhes has remained as the worst performer as in the past. Koshi mobilised 56.5 per cent of its total budget Rs. 39.74 billion and Madhes's progress is 31.29 per cent of Rs. 46.88 billion.

Bagmati, the province with the largest budget among the provinces, has used 46.54 per cent of Rs. 70.93 billion budget. Likewise, out of Rs. 35.9 billion budget of Gandaki Province, only 43 per cent is utilised. Karnali has the smallest of all budgets among the provinces with Rs. 32.74 billion, of which the province has mobilised 40 per cent. Lumbini and Sudurpaschim have spent 49.6 per cent and 43.74 per cent from their annual budgets of Rs. 42.63 billion and Rs. 36.74 billion. 

 

Poor capital expenditure

In terms of capital expenditure, provincial picture is even bleaker. Koshi could spend 50.5 per cent of its total capital allocation in 11 months and is in pressure to use the remaining budget in just one month period. Yet, the province has said that the overall spending of the province would reach 85 per cent by the end of the current fiscal in mid-July.

Capital performance of Madhes is just 33 per cent, Karnali 35 per cent, Bagmati, Sudurpaschim and Gandaki about 40 per cent, and Lumbini 47 per cent.

It is pathetic that with the full-fledged structure of governments, dedicated ministry for economic affairs and planning, and jurisdiction of a small geographical area, provincial governments have been failed to exhibit the much-needed activism to implement development work.

In their budget speech five provinces did not present the annual estimates of expenditure, capital budget utilisation and revenue collection while only a couple of them identified the challenges and constraints to the maximum use of the budget.

Almost all of the provincial governments are yet to identify the sources of income and lessen their dependence on the federal funds created with the contribution of the local governments.

 

Human resource shortage

It seems that the provinces have become poor imitators of the federal government and are simply copying the programmes and working style of the latter.

Economist Keshav Acharya said that the provinces have been performing poorly due to frequent changes in the government leadership and lack of technical manpower as well as civil servants.

Since their creation, the sub-national governments have been operating with a minimum supply of human resources. "I have seen an under-secretary and one first class non-gazetted employee running the ministry of economic affairs of Madhes Province a couple of years ago," said Acharya.

Meanwhile, no high government official wants to stay in the provinces and help the government to devise better plans and put better performance in its development efforts. A joint secretary who is deployed at a provincial ministry has recently said that he and his colleagues began the efforts to make their transfers back to the offices of the federal government from the very next day of their appointment at the offices of the provincial government.

"This is a serious negligence on the part of the federal government that it has failed to make enough provision of human resource to let the provinces function well. While they need 10-12 secretaries, most of them run with just 3-4," said Acharya.

He also said that the federal government does not allow provinces to select even projects worth Rs. 100,000 for conditional grants.  

Meanwhile, except Lumbini, all six provinces have included the election constituency development programme which was not well-accepted for the federal lawmakers.

 

Coalition anomalies

Economist Naveen Adhikari maintained that the political coalition also has a kind of repercussion on the development aspiration of the provinces.

"There is a lack of coordination and harmony between the chief ministers and economic affairs ministers of the provinces if they are from the two separate parties. The election coalition has further degraded the performance of provincial governments," he said.

Likewise, the provinces have failed to set long-term goals in which the federal government has also some weaknesses as it did not allow the former to define their own scope. According to Adhikari, the provinces need to set a couple of priority areas such as health, education or infrastructure development in order to focus their resources and efforts to achieve development targets.

 

Major challenges

According to Minister of Economic Affairs and Planning of Sudurpaschim Province, Naresh Kumar Shahi, lack of expertise in budget allocation and proritisation of projects and programmes, the provincial government couldn't mobilise the capital budget effectively.

In the budget of the next FY 2023/24, he said that the provinces have been facing the challenges like insufficient and unjust distribution of resources to the priority areas, and failure in institutionalisation of economic discipline in government expenditure system. Likewise, provinces also lack the institutional capacity to allocate resources for transformative projects and implement them.

Meanwhile, even after seven years of existence, provinces have not been able to make significant achievements in capital formation, job creation and expansion of economic activities.

Likewise, the government of Bagmati Province said that the decline in the real estate transaction and import of consumer vehicles, it couldn't meet the revenue estimates for the current year.

According to Madhes Province, ever-increasing recurrent expenses, small size of capital budget, youth migration, scattering budget to many small projects, and poor implementation of development work are the major challenges of the government there.

 

Economy and budgets

There is a disparity among the provinces in terms of their Gross Domestic Product (GDP) and size of budget. For example, Bagmati which has the GDP of Rs. 1981 billion with 37.95 per cent contribution to the national economy has come up with the budget of Rs. 62.7 billion for the next FY 2023/24 while Karnali Province that had just Rs. 221 billion GDP and 4.1 per cent contribution to the national economy has come up with the budget of Rs. 33.37 billion.

Madhes Province has the GDP of Rs. 707 billion and Rs. 44.11 billion budget for the next year.

Likewise, Koshi has 15.8 per cent share in the national economy, Gandaki 8.9 per cent, Lumbini 14.1 per cent and Sudurpaschim 7 per cent.

Provinces have a negligible source of their internal income and largely depend on the federal government for the grants to implement their development works and manage general expenses.

 

Published in The Rising Nepal daily on 2 July 2023.