Bijay Damase

May 15: At present, the government is busy preparing the budget for the next fiscal year (FY 2023/24). According to the constitutional provisions, intensive discussions on the priorities and principles of the budget are going on in the Parliament to bring the budget for the year 2023/24 on this May 29.

What is the budget?

Generally, a budget is an estimate of income and expenditure. It determines how much income the government shall earn and how much it shall spend in a certain period of time. The budget cycle continues throughout the year. After determining the goals and objectives of the budget, the preparation of drafting the budget begins by analyzing the old information.

When the government starts budgeting, it asks for plans and programs from the lower levels. The government agencies send the plan from the districts. After those plans are received by the line ministry through the concerned department, new plans are registered in the Project Bank. Projects registered in the Project Bank are included in the budget on a priority basis.

The projects and programs included in the budget are classified into P-1, P-2, P-3 and the budget is allocated based on priority.

According to former Vice Chairman of the National Planning Commission Dr Pushparaj Kandel, this has to some extent discouraged the old trend of including small and petty schemes and programs directly in the budget on the basis of personal influence.

Earlier, when the government started preparing a new budget, high-ranking people and parliamentarians used to create a lot of fuss include their petty plans and programs in the budget. Now that has become somewhat discouraged.

After the country adopted the federal system, the federal government started announcing budget on May 29, followed by the budget announcement by the state governments and then the local governments.

While preparing the budget, the government should give priority to the fundamental rights of the people guaranteed by the constitution. By ensuring these rights, the budget is expected to develop the country, flourish industries, and create jobs within the country itself.

The Ministry of Finance, National Planning Commission and related ministries participate in the preparation of the budget. While preparing the budget, one should work according to the provisions of the Financial Procedures Act and Financial Regulations.

There are methods and procedures for budgeting. Just because the Ministry of Finance prepares the budget doesn’t mean that the finance minister directly submits the budget in the parliament. It has its own method and process from the preparation of the budget to the time it is submitted to the parliament, and it should be followed accordingly.

The National Planning Commission sets the budget ceiling for the government in the winter. Based on that limit, the preparation of the budget gets started.

The preparation of budget includes various steps from compilation of draft forms to tabulation and study, discussions with officials of the National Planning Commission on the policies and programs of the budget, preparation of financial surveys along with discussions on income and expenditure for the budget in the ministry

Similarly, foreign technical assistance and budget suggestions are also collected for the budget. Concerned bodies give suggestions through various means. Before unveiling the budget, the government submits the priorities and principles of the budget to the parliament.

The budget session is currently underway according to the same process.

The finance minister has to include the suggestions given by the parliamentarians in the budget. After the discussion on priorities and principles, the president on behalf of the government submits the new fiscal year's policies and programs in the Parliament.

After that, preparations are made for the pre-budget presentation in the Parliament. The final draft of the target and progress reports of the ministries is prepared. Along with this, the final draft of the progress report of various institutes is also prepared. The report of the Revenue Advisory Committee is studied and the projects involving foreign aid are studied. The Ministry of Finance then prepares an economic survey. Expenditure estimates and topic-wise expenditure estimates are also prepared. Similarly, the preliminary draft of the expenditure estimate is prepared and the three-year expenditure is estimated.

The Ministry of Finance prepares the draft of the schedule of the finance bill, prepares the source book of projects involving foreign aid, prepares the initial draft of the budget statement, publishes the progress report of the institute, and publishes the economic survey report.

Appropriation Bill, National Debt Collection Bill, Loan and Guarantee Bill, Finance Bill and Provisional Expenditure Bill are also prepared at this time. The budget begins to take its final form after the Ministry of Finance informs the Office of the Prime Minister and Council of Ministers and the President’s Office about the budget after deciding the revenue estimates and programs.

After the budget is made, the finance minister should brief the National Planning Commission and the Council of Ministers on the matter. After approval by the cabinet, the president is informed about the new budget. After this, the budget will be announced in the federal parliament on May 29.

After that, discussions on the budget starts in the parliament. After the budget is passed by the majority in Parliament, the door to implement the budget opens. The budget passed by the House will be implemented from mid-July. The tax rates proposed through the budget, such as customs and excise duties, will be implemented from the day of the budget speech.

Before the promulgation of the new constitution in Nepal, it was customary to bring the budget before mid-July. But now, the budget is announced on May 29 every year so that the budget can be implemented from the first day of the new fiscal year starting from mid-July.

However, there is a continuity of the same trend as the budget authority is not given to the implementing agencies on time, the capital budget is allocated less than the current expenditure, the capital budget is not spent according to the allocation, there is lack of clear criteria in the budget formulation, and the tendency to formulate the budget in haste is still prevalent.

Similarly, there is a tendency that all expected foreign aid in the budget is not received in reality.

Even though the Public Expenditure Review Commission established by the government has recommended to improve the expenditure system as well as the process of fixing the resources of the budget, it has not been implemented yet. The government announces that it will implement the commission's report, but it is never implemented.

As the economic indicators are not positive at the moment, many people are interested in what kind of budget the Ministry of Finance will bring to improve the economy. Experts have been saying that there is a need to increase production in the country and a budget that will support the increase in production is the need of the moment.

In the current situation, experts have been suggesting that a distribution-oriented and unimplementable budget cannot be  justified. Even in the past, experts used to give such suggestions, but the government continued to bring distribution-oriented and unimplementable budgets.

History of Budget in Nepal

The tradition of presenting the annual budget started in Nepal since 1952. On February 4, 1952, the first budget was presented in Nepal according to the constitutional provisions. The budget was presented by the then Finance Minister Subarna Shumsher Rana.

The size of the budget was Rs 52.5 million.

The budget from 1952 to 1956 was focused on maintaining peace and security, revenue collection and daily administration. Since the beginning of the planned development in 1957 and the implementation of the first five-year plan in the year 1957/58, the practice of budget management started with the target of achieving the goals mentioned in the plan.