Budget Implementation

With the start of the current fiscal year, the Ministry of Finance (MoF) has taken the initiative to ensure that the annual budget is implemented in an effective manner. The MoF has come forward with this plan in view of a very disappointing situation of capital budget spending during the last fiscal year 2022-23. Less than two-thirds of the total capital budget was spent. Finance Minister Dr. Prakash Sharan Mahat has begun working on a strategy to execute the budget from the beginning of the fiscal year to bring out desired outcomes. In the absence of such a plan, the capital spending remained dismal in the past. As it is a quite challenging task for the existing government mechanisms to increase the utilisation of the capital expenditures, Minister Mahat has expressed his commitment to implementing the budget successfully. On Wednesday, he summoned a meeting of the secretaries of all federal ministries and instructed them to prioritise the budget execution. The budget for the current fiscal year is coming into effect from July 31.

The ministries and other public bodies are required to advance the bidding process of the projects with detailed project report (DPR) immediately after the commencement of the new fiscal year. And project contracts need to be signed within November in order to complete development projects on time. The Finance Minister has also directed the secretaries not to forward the projects without resource guarantee. A budget deficit of the government was one of the obstacles to development activities. According to the Financial Comptroller General Office (FCGO), the government faced a budget deficit of about Rs. 398 billion in the last fiscal year because of low revenue collection amid rising public expenditure. The government spent Rs. 1.429 trillion in 2022-23. The sum accounted for just 79.69 per cent of the targeted amount of Rs. 1.793 trillion. Likewise, the government made a total income of Rs. 1.031 trillion while it targeted to earn Rs. 1.458 trillion. The government's income in the last fiscal year was Rs. 94 billion less than the amount of the earlier fiscal year.

Since it is a tricky job for the government to meet its revenue collection target amid slump economic activities, the MoF should leave no stone unturned when it comes to increasing its receipts. This may be possible through reforming the revenue administration. Finance Minister Dr. Mahat met with the secretaries after having made inspection trips to different customs and revenue offices. He had asked the customs officials to intensify efforts to meet the revenue target. Without sufficient funds, the government cannot finance the development projects. Because of the budget deficit, the government failed to make payments to several contractors during the last fiscal year. The contractors had to lobby hard with different ministries and departments for releasing the payments. There has been a growing propensity among the contractors not to complete the development projects on time. Carrying out substandard work is another issue. 

Keeping all these things in mind, the MoF has made it mandatory for the public agencies to award the contract to contractors within mid-November. The government bodies are required to forward the bills given by the contractors of the projects to the MoF within one month. Then, the MoF reviews the bills and approves them within 15 days. The MoF has also adopted the policy of not making expenses in the last month of the fiscal year (from mid-June to mid-July). If this guideline is followed strictly, it may help check fiscal irregularities taking place while carrying out development works.