Fiscal Discipline Wanted

No nation can realise the goal of overall development and prosperity without promoting good governance. It needs no mention that good governance is a process of assessing how public institutions conduct public affairs and manage resources, and ensure the realisation of human rights by maintaining the rule of law. It is saddening that Nepal has been reeling from an extreme level of fiscal indiscipline and dearth of accountability despite the unwavering commitment made by all the political parties and successive governments to ensure effective governance. The Office of the Auditor General (OAG) has again portrayed a worrisome state of arrears in the use of public funds. The OAG’s 59th annual report that was unveiled on Wednesday shows that the nation’s fiscal accountability has remained very distressing. This is mainly because of weak internal control mechanism, observance of fiscal procedures and enforcement of audit report. It has led to the continuation of financial mismanagement, hindering the process of reforms in the nation’s fiscal administration.

According to the report, the total amount of arrears recorded by the end of the fiscal year 2020/21 has reached Rs. 483.6 billion. During the period, arrears have surged by 15.46 per cent as compared to the previous fiscal year 2019/20. Having audited the accounts of 5,665 agencies last year, the constitutional body found arrears of Rs. 115.05 billion. The public institutions were able to recover only about Rs. 4.21 billion that year. The report discloses that altogether Rs.  345.56 billion is required to be cleared  through updating  the  details  of   transactions and payments. Various government committees and other organisations have performed poorly when it comes to observing fiscal disciplines. These offices have an alarming arrear rate of 6.89 per cent of the total audited amount of   Rs.  206.12 billion. 

Another disturbing aspect is that among the three tiers of government, local governments have the highest percentage of arrears. The report indicates that of the audited Rs.  1051.1 billion of local governments, about Rs. 43.91 per cent is arrear. Provincial governments combined have Rs. 7.48   billion in arrears. This is stands at 2.5 per cent of the audited amount of Rs.  299.57 billion.  However, the federal government agencies have reported the lowest level of arrears in the last three fiscal years. The federal government has reported the arrears of Rs. 49.47 billion, which is the highest in terms of amount. Its arrears are 1.75 per cent of the audited amount of Rs. 2820.38 billion. 

The Auditor General's report mentions that among  the  federal  ministries,  the Ministry of  Communication and Information Technology has the highest amount of  arrears of 25.18 per cent of  Rs. 15.38 billion, followed by the Ministry of  Agriculture and Livestock  Development with 15.53  per cent arrears of  Rs. 22.08 billion. The Ministry of  Industry, Commerce and Supplies (12.71 per cent), Ministry of  Physical Infrastructure and Transport (4.61 per cent), Ministry of  Education, Science  and  Technology  (4.25  per  cent),  Ministry of  Land Management, Cooperatives  and  Poverty  Alleviation  (3.96  per  cent), and Ministry of  Health and Population (3.35 per cent) are other ministries having a high rate of arrears. In view of the rising level of arrears in public institutions, the OAG has drawn their serious attention towards strictly following the fiscal discipline over the years. Haphazard transfer of the budget at the end of the fiscal year and weak utilisation of foreign aid is another reason behind this problem. As suggested by the OAG, public agencies should have harmony in planning and budgeting, and cut down unproductive expenses. There should also be better coordination among them.