The budget presented by the government reflects its commitment to serve the citizens and avoid harm It is an economic guidance as well as the financial responsibility of the government. This detailed list of planned activities and financial allocation is a cornerstone of a democratic system. In such a system, the party winning in elections forms the government and takes responsibility for the country’s needs. Based on these needs and campaign promises, the government builds policies, programs, and most importantly, the budget. Finally, a legal framework ensures accountability by requiring parliamentary approval for the government-prepared budget before implementation.

The Constitution of Nepal, issued in 2072, has adopted the federal system, which has provided constitutional certainty that the use of state power will be at three levels, namely, the federal, the provincial and the local level. The work, duties and rights of the three levels of government have been clarified in the constitution. However, some legal and practical problems have emerged regarding the application of the constitution. Since the provincial structure is a completely new practice, many questions have been raised about the provincial government’s actions from various angles. In order to increase the efficiency of the provinces, the provincial government needs to exercise caution and restraint in the use of its constitutional and legal rights while also increasing cooperation with the federal and local levels.

It is necessary for the provincial government to formulate appropriate policies, plans and budgets to meet the needs and wishes of the common citizens under the constitutional rights. It is important to effectively implement the formulated budget. Along with the scientific formulation of the budget, effective implementation, fair monitoring and evaluation as well as control can only communicate hope to the common citizens.

The budget created and implemented by Karnali province since its inception till now does not appear to be appropriate and effective. When there is a weakness in the effective formulation and implementation of plans and budgets, citizens do not have confidence and trust in the government. Due to the inability to create a budget based on local needs and its effective implementation, questions have been raised from various angles about the relevance and effectiveness of the provincial government. The criticism and complaints are due to the failure to effectively implement the plans and budgets of the provincial government. The main reasons for this are political instability, short-term changes in government, and the political interference in planning and budgeting. Similarly, budget formulation is unrealistic with low stakeholder involvement, delay in budget implementation, lack of objective monitoring and control, etc.

This article discusses the top 10 steps to be taken by the Karnali provincial government and local levels to increase budget credibility and effectiveness in its implementation.

1. Entrepreneurial policy to increase domestic revenue

A critical problem in the financial management of Karnali provincial government and local levels is low internal income. A limited tax scope alone is not sufficient for the growth of domestic income. In order to increase the scope of taxes, there is a need for enterprise-friendly policy and environment. It is necessary for the provincial level to make policies that facilitate the business registration process, simplify the process of paying taxes, make the process of obtaining electricity and water easy, simple and cheaper, and to provide land for commercial purposes to private investors. It is necessary to make the system of service delivery faster and reliable which requires a long process to be completed and takes many days to register a business. Rules and procedures for starting and running a business need to be simplified.

2. Development of systems of knowledge transfer

Another challenge in Karnali regarding fiscal federalism is the lack of skilled manpower. In addition, the trend of transferring employees has also reduced the effectiveness of budget implementation. Knowledge transfer and succession planning are important to preserve institutional capacity and skills when experienced employees are transferred or leave the office. This ensures effective functioning of government agencies. There is also a need for a system where the new employees are immediately aware of the work done in the past and the person who works until the new arrival is aware of the entire work.

3. Budget progress and performance evaluation

There is a tendency where the people’s representatives and employees blame each other regarding the implementation of the budget. In some offices, the budget is implemented effectively due to the employee’s effort, while in some it is not due to the personnel. Therefore, the effectiveness of budget implementation can be linked to the performance evaluation, which is considered important in the development of the employee’s attitude. It helps to develop a culture of reward and punishment in the budget implementation process. Along with this, it is also important to make the performance evaluation system systematic, fair and transparent.

4. Development of institutional systems

An independent and automatic system should be developed to prevent development projects from being interrupted by changes in political and administrative leadership in the province. It is necessary to strengthen and stabilize the agencies to ensure effective performance, despite the changes in leadership. A structure needs to be in place that cannot be changed during the implementation of important plans, regardless of the political leadership. The programs should not be overambitious and individual centric. Authorized organizations should be responsible for budget formulation and implementation rather than a limited number of people. For example, ensuring continuity of programs, like the ‘10,000 job creation’ plan, is vital when governments change hands. Or such programs should not be included at all. It is necessary to understand that the plan belongs to the government and government institutions and not to the leaders.

5. Making the Provincial Planning Commission active and effective

It is necessary to make the Provincial Planning Commission active and effective for budget and project creation, strategy, study, research and short-term as well as long-term planning. The government has prioritized planning commission of the Karnali provincial government. The Chief Minister has historically shown a preference for independent decision-making. To address this and ensure effective planning, establishing a well-empowered Planning Commission is crucial. This commission could be developed by expanding the scope of the existing budget monitoring and evaluation system, allowing it to play a more comprehensive role in strategic planning.

6. Development of project selection criteria

It is necessary to determine the clear criteria and stages of budget formulation in order to make the criteria of planning and selection of the plan practical and productive in Karnali. The project bank concept needs to be effective and only the project bank plans should be included in the budget. It can play a role in reducing political interference in the budget making process. In order to minimize political interference in the budgeting process, measures should be taken to ensure that plans are based on real development needs rather than political interests.

7. Budget Implementation Schedule

Regarding the budget, the most criticized issue in Nepal at the moment is the tendency to spend large amounts at the end of the financial year. For this, it is necessary for the Karnali provincial government and local levels to develop a clear schedule and time frame for budget formulation and implementation. It is necessary to develop a system to continuously review whether the implementation is according to the schedule, discuss the challenges and adopt immediate improvement measures.

8. Identification and prioritization of development needs

Resource allocation issues need to be addressed to ensure a more balanced distribution of projects, prioritizing them on their real relevance for development. A challenge is that there is no need assessment before the budget and programs are made. A long-term impact study should be done after assessing this kind of need. There are many examples in Karnali province where policies and programs are not made based on facts and research, and even the implementation of those programs is not effective.

9. Citizen awareness about budget formulation process

Another important task is to make citizens aware of the budgeting process. Their expectations will be built according to their understanding. The most important thing is to develop a method for budgeting so that it can be adopted collectively. This will ensure that the political and administrative instability does not affect the process. It is necessary to create a long-term development strategy for the province. The impact of the strategy should be studied and the policies should be made accordingly.

10. Stop populist programs

The individuals in leadership have the impression that they can win elections time and again with introduction of populist programs and bragging about them in speeches. Such schemes, which are brought up because of the whims of some individuals without considering the long-term effects, are becoming ineffective. Even within the federal government, the Prime Minister’s Employment Program, Social Security Program etc. are implemented ineffectively. Some of the populist programs of the Karnali province that have rendered ineffective including the “Chief Minister’s employment program” and “Daughters Bank Account” should be closed. The budget made from the common people’s taxes should not be used in such ineffective programs based on the whims of any leader, party or employee. The federal government is there to bring a public welfare budget. So, the provincial and local governments should bring budget based on localized needs instead.

(The authors are associated with the Hriti Foundation. This article was published originally in the Sajha Bisaunee Daily)