MoF In Need Of Burden Sharing


Since his appointment as the Finance Minister more than one-and-a-half months ago, Dr. Prakash Sharan Mahat has, on an average, attended two events and seminars a day. He had to attend pre-budget programmes organised by various business, economic and professional organisations. He was in a rush each time. He even asked most organisers to keep the programme short. He reached the programme venue on time and left the event immediately after his speech, sometimes leaving the audience bewildered. He listened to the suggestions, demands and reservations related to the budget for the fiscal year 2023/24 at his office in marathon meetings. 

While a finance minister's public engagements are needed in a democratic society, this hectic schedule could impact the process of policy-making, budget formulation and government coordination. The budget-formulation process starts in January but the budget is presented to the federal parliament at the end of May every year. The final month witnesses the publication of principles and priorities of the budget, government policy and programmes for the next fiscal year, economic survey and the budget. 

Rigorous involvement

All these activities require rigorous involvement of the finance minister. This demands an aide to him, probably in the form of a state minister at the Ministry of Finance (MoF) as it is also considered as the 'ministry of the ministries'. MoF has the responsibility of collecting the revenue estimated by the budget, and managing other resources, including foreign and domestic loans and grants, implementing budget and ensuring utilisation of capital allocation. All these sectors have remained pathetic for the past several years. This ministry also deals with development partners and publishes development cooperation report. 

Similarly, critical agencies like the Department of Customs, Inland Revenue Department, Financial Comptroller General’s Office, and Public Debt Management Office are in operation under the MoF apart from other nine divisions. Regulators such as the Securities Board of Nepal and Insurance Authority also work closely with this ministry. So does the National Planning Commission. 

This is such a ministry where organisations and people make rounds to get their programmes and projects succeeded in obtaining budget allocations. Since tax discounts, grants and concessions to the businesses are also announced and implemented by this ministry, businesspeople and industrialists also make frequent visits there. 

Meanwhile, the role of the finance minister becomes more critical in the times of economic crisis. Underperformance in revenue collection has serious repercussions on the spending which has also affected development works across the country. Businesses are facing crises in three major sectors of the economy– manufacturing, construction, and wholesale and retail trade—which  are projected to witness a negative growth by more than 2 per cent. Industries are running less than 40 per cent of their capacity while many cottage industries and trading businesses have been shut down for the past six months. Everyone is looking at the MoF and the central bank for solutions. 

A culture has been developed over the past years that everyone wants to put their demands and recommendations in front of the finance minister and the latter also doesn't want to lose the opportunity to be friendly with them. This trend should be changed. Since the budget and policies are political documents as well, the finance minister should lead the process while high-level bureaucrats should be given the responsibility. They should be responsible for the performance in terms of executing plans and programmes, mobilisng budget, hearing the public and private sector grievances on development financing, and reporting to the ministers.

Meanwhile, there is a growing trend to transfer the cadres of the MoF who are knowledgeable and skillful in economic affairs than other offices. This tendency should not be given continuity since such employees who reach there due to the blessings of the minister or certain political party would only cause damage to the institution and the economy. The finance minister should focus on policy-making and budgetary work while the state minister for finance should interact with stakeholders, line ministries and subnational government structures. The latter can be useful in attending programmes, monitoring budget execution, and mobilising agencies responsible for it. 

Good chemistry

However, given the previous trend of appointing the minister of state just to manage political leaders or appease the ruling parties, one could doubt the effectiveness of having additional portfolio at the taxpayers' expenses. Most state ministers in the previous governments were less effective in policy matters and public issues. To avoid such unproductive affairs, the finance minister should be given the authority to select his subordinate in consultation with the prime minister. There must be a good chemistry between the two leaders at the ministry even when they belong to different political parties. The finance minister's critical time shouldn't be spoilt by the mundane affairs like inaugurating a programme or visiting a 'development project' implemented by a non-governmental organisation. 

The country is reeling from an economic crisis which demands more time and attention of the finance minister. He should be sitting with the concerned agencies and experts to find a solution to the current crisis, mobilise more revenue and capital budget, cut down recurrent expenses, up-scale the capacity of the civil servants, and enable local governments in development works. Attracting more foreign investment and tourists, boosting the confidence of the business community in the country and exporting goods, and enhancing the tax base are urgently required at this critical situation. The finance minister should be busy devising effective policies and programmes. Rest could be left to the discretion of the minister of state and the bureaucracy. 

(Dhakal is a journalist of this daily.)

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