It has been six years since the establishment of Karnali Provincial Government. The provincial government has already introduced the budget of seven fiscal years from 2074/075 to 2080/081. Even though a partial budget was introduced in the fiscal year 2077/075 due to time constraint, the full budget was implemented in the following rest of the fiscal years. The budget presents the operational plan of an organization or authority for a year and assists in monitoring the effective implementation to measure the success or failure of that year. The process of budget formulation is also connected to the effective implementation of the budget. Thus, this article discusses how the budget of the Karnali provincial government is formulated and explores the primary and secondary stakeholders involved in the budget making process.
The Karnali province Government has prepared the Budget Formulation and Implementation Guideline, 2075 and the Karnali provincial Plan Formulation Guideline-2075 based on the model of provincial-level plan formulation guidelines created by the National Planning Commission in 2075. This article does not discuss the implementation of the said guidelines. That is a matter of law. Whether the budget has been prepared according to the law or not is a subject of comparative study, which is necessary. It is also necessary to conduct such a study on behalf of citizens. Therefore, this article will discuss the method of formulating the provincial budget. The subject of the study is whether the formulation and implementation of the budget of the provincial government has been done in accordance with the law or not, which should be done by a non-governmental or independent agency. Effective budget implementation of the province determines whether the provincial structure will succeed or fail.
A budget is an estimate of the government’s income and expenditure for a fiscal year. Based on the estimated income of that fiscal year, the projects are proposed for the development of the province. There is a constitutional provision to submit the budget on Ashad 1st in the provincial assembly while the central government presents the budget on Jestha 15. On the other hand, the local level should present the budget by Ashad 10. The budget is implemented starting from the fiscal year on the 1st of Shrawan every year and the plans in the budget are directly related to development.
Basis for formulation of annual plan
According to the Karnali Province Plan Formulation Guidelines-2075, there are some considerations to be taken into account while formulating the budget. These include the Constitution of Nepal, the vision, periodic development plans of the central and provincial governments, medium-term expenditure structure of the province, sustainable development goals, interrelated issues of development, liabilities emerged from national and international commitments, acts related to other economic policies, provincial annual plans, annual development programs, and acts related to budget formulation. Similarly, there is also a provision to take federal and provincial laws into consideration. These include National Natural Resources and Fiscal Commission Act-2074, Intergovernmental Fiscal Management Act-2074, policies, laws and standards issued by the federal and provincial governments, Public Procurement Act-2063 and Regulations-2064, and relevant clauses and rules of Karnali Province Public Procurement Management Guidelines-2075, Karnali Province Economic Procedures Act-2075 and Regulations-2075. Karnali Province Fiscal Transfer (Management) Act-2075 and Regulations-2075, Karnali Province Tax and Non-Tax Revenue Act-2075, and Karnali Province budget formulation and implementation guidelines-2075.
Detailed budget including projected data of income and expenditure for next fiscal year, expenditure estimates by the end of Poush of each year decided by the Ministry of Economic Affairs and Planning on the recommendation of the Resource Estimation Committee, own source revenue estimates, estimates of revenue sharing, and estimates of fiscal transfer grants should be submitted to the federal government.
The details of the resources available to the provincial government in the next fiscal year under revenue sharing and fiscal equalization subsidy from the government of Nepal should be submitted by the end of Falgun. The provincial government should send the details of estimated revenue sharing and fiscal grants to the concerned local by the end of Chaitra.
The Budget and Resource Committee, which is established for formulating medium-term expenditures, determines the budget ceiling. The committee is responsible for projection of internal revenue, income from revenue sharing, fiscal equalization grant from the federal government, internal debt and other income; and prepares a blueprint for the equal distribution of projected means and resources taking regional needs and priorities into account. It sets the total budget ceiling based on the estimation of resources for the upcoming fiscal year, as well as sectoral budget ceilings. The committee sets the criteria for prioritizing the budget’s plans and programs based on the guidelines received from the Government of Nepal, along with the economic condition and the internal revenue condition of the province. Additionally, it sets the guidelines for the formulation of sectoral budget and other works related to resource estimation and setting budget ceilings based on the needs of the province.
The committee should complete its work by the 15th of Chaitra of every fiscal year. When projecting the budget and resources, the committee also projects for two more years after the next fiscal year. The committee determines and distributes ceiling based on the internal revenue of the province, amount received from revenue sharing, projection of grants, loan and other income along with the equitable distribution to the relevant sectoral ministries or authorities.
The budget ceiling for the next fiscal year should be provided by the Ministry of Economic Affairs and Planning to the relevant ministries/authorities within the 20th of Chaitra of the current fiscal year on the recommendation of the Karnali Province Planning Commission. There is a provision to pay attention to the amount required for provincial pride projects, the amount required for projects requiring supplementary funds, the amount specified for conditional grant programs, and amounts required for implementing goals of sustainable development; including national and international commitments. Similarly, other considerations include the amount required for essential tasks of the province in accordance with the schedule of the constitution as well as prevailing laws, and the amount needed for the empowerment of the province’s social and cultural diversity, which are taken into account while determining the budget ceilings.
The budget ceiling for other programs should be determined after separating the budget required for salary allowances and office operations from the total budget ceiling. While determining the budget ceiling for administrative expenses, it should be done in such a way that it does not exceed the amount received from revenue sharing and the amount of internal revenue.
On the recommendation of the Karnali Province Planning Commission, the Ministry of Economic Affairs and Planning should send a budget ceiling and guidance including both ministerial and functional form of operational, capital and fiscal arrangements, within the ceilings of the budget prepared by the Budget and Resources Committee. The Ministry of Economic Affairs and Planning should enter the Ministerial Budget Ceilings and Guidance in the Ministerial Budget Information System or specified software and send it to the relevant ministries. The relevant ministry should send the budget ceilings and guidelines to the subordinate offices/bodies.
Project selection and prioritization
The office or authorities under the relevant ministries/authorities should formulate the program and send it to the directorate and the directorate should then propose the program and budget to the concerned ministry/authority. When proposing a program or project, only those projects that have been included in the project bank on the basis of the project proposal prepared after analyzing the project as mentioned in Schedule 10, shall be selected. The selected projects should be prioritized according to the bases mentioned in Schedule 12.
Annual budget and program formulation
After the prioritized projects are submitted to the relevant thematic ministries/authorities, it should formulate the budget of the project based on the idea, goals, objectives, strategy, medium-term expenditure structure of the periodic plan by avoiding the duplication in the program. Similarly, if the projects at provincial level; emphasizing provincial pride, are not included in the budget ceiling, guidance, and prioritization bases received from the Ministry of Economic Affairs and Planning or Karnali Province Planning Commission; and project bank or medium-term expenditure structure, then such projects should be selected on the basis of clear criteria and appropriateness ensuring budget certainty.
The essential projects that fulfill the prescribed criteria; but cannot be completed solely with the resources of the province, should be proposed to operate through complementary grants. The relevant ministries/authorities should enter the projection of annual expenditure; along with medium-term expenditure structure of the selected projects/programs and next fiscal year’s budget to L.M.B.I.S or other specified software and then submit it to the Ministry of Economic Affairs and Planning or Karnali Province Planning Commission.
Discussion on budget and programs
It is essential to have discussion on the budget and annual development program of plans/projects proposed by different authorities/ministries in the Ministry of Economic Affairs and Planning, and Karnali Province Planning Commission. The Constitution of Nepal (fundamental rights, principles and policies of the state, and the jurisdiction/authority of the province); national vision; national periodic plans; provincial periodic plans; sustainable development goals; needs, problems and opportunities of respective provinces; and prioritization of selected plans from project banks should be taken into consideration during such discussion. The budget and program discussions must be concluded and finalized by Jestha 15 at the latest.
Preparation of Draft
After the discussion in the Ministry and Commission, the documents of the annual development program of proposed plans/projects must be prepared. The preparation of such draft should be in accordance with the format of the annual development program included in Schedule 13.
Approval of Budget and Programs
The programs/projects proposed after the budget and program discussions must be approved by the Karnali Province Planning Commission’s full meeting or by the Ministry of Economic Affairs and Planning within Jestha 25.
Presentation of Budget and Programs in the Provincial Assembly
After the approval of the medium-term expenditure structure as well as the budget from the Ministry of Economic Affairs and Planning or the Karnali Province Planning Commission, the Minister of Economic Affairs and Planning should present it to the Provincial Assembly by Asar 1, along with a hard copy. The approved annual budget and programs by the Provincial Assembly must be published on the website for public information. A copy of this must be sent to the Ministry of Finance, National Natural Resources and Fiscal Commission, Office of the Chief Minister and Council of Ministers, relevant thematic ministries of the province, Karnali Province Planning Commission, and local bodies within the province.
Implementation Plan for Action
To effectively implement the annual development program, a detailed implementation action plan must be prepared and implemented. The implementation action plan must include necessary implementation methods, implementation schedules, and responsibilities to achieve the objectives of the annual plan. The relevant ministries/agencies responsible for the annual development program and budget must prepare an implementation action plan for each project and program. The detailed description of the activities for implementing the development program and its budget breakdown is necessary.
The Ministry of Economic Affairs and Planning should authorize the relevant ministry/authority within seven days to spend the budget for the implementation of the annual budget and program approved by the Provincial Assembly. Upon this, the relevant ministry/authority shouldl grant authority to their respective department/division/branch/unit within 15 days for the budget implementation. Once the authority for budget implementation is obtained, the department/division/branch/unit must submit the program implementation action plan to the relevant ministry/authority within seven days. The relevant ministry/authority should provide suggestions if any amendments are required based on technical capacity, program responsiveness, prioritization of implementation, and status of cash flow in the budget implementation action plan. Based on the suggestions received, the relevant agency should revise the implementation action plan and re-submit it within five days. The respective ministry/authority then compiles all the action plans obtained from the departments/divisions/branches/units, and submits an Integrated Implementation Action Plan to the Office of the Chief Minister and Council of Ministers, Ministry of Economic Affairs and Planning, and Karnali Province Planning Commission.
This article was initially published in Sajhabisaunee Daily in Nepali Language.