Federal Budgetary System

The Federal budgetary system in Nepal doesn't have a decades-old history. However, Nepal's systematic budget system spans a six-decade history. The main systematic budget was developed when the Rana regime was overthrown in 1951. Nepal adopted a federal system of government when declaring its new Constitution in 2015. Nepal's federal system is based on the belief that the 'centralized' and 'unified' regime system of government is a source of discrimination, exclusion of minority groups, and therefore a source of conflict. Nepal's fiscal federalism supports Richard Musgrave's theory that the federal state system is generally efficient and effective in solving problems facing the government today, such as simple distribution of income, economic and effective allocation of resources, and economic stability. A three-tier system of government with federal, provincial, and local levels was observed in Nepal after the promulgation of the constitution. The constitution is the supreme document that clearly defines the role of the three levels of government. As a result, in parliamentary practice, it is critical for the federal government to make an effort for the state's and its citizens' prosperity. The federal government has multifarious power to govern a country so that it can protect national security, promote economic stability, and foster social reforms. A nation's adequate resources are the key factor in enabling the federal government to efficiently perform its functions to improve the economy and social structure. Borrowing, collecting taxes, or spending money at will cannot be used to support government policy. To have a thriving economy and sophisticated social structure, a country must have pragmatic planning and budgeting that guides how to spend limited resources to meet the government's requirements. Article 119 of the Nepalese Constitution states that on Jyeshta 15 of each fiscal year, the Finance Minister will present an assessment of the government budget, expressing estimates of income and expenditure. Budget Control can be a commanding control. The constitution lists the powers to actuate and collect taxes and consequently, to borrow. The government must set it up every year for its own consumption and income. This estimated activity is referred to as the federal budget. The federal budget is a subtle element of government revenues, investments, loans, and liabilities. The largest portion of income comes from taxes, be that as it may stem from elective sources such as duties, fines, licenses, and gifts. The federal budget system follows a top-down and bottom-up method. Under the top-down method, the foremost responsibility for federal budget formulation rests with the Ministry of Finance. The Budget and Resources Committee at the National Committee defines the macroeconomic framework, the Medium Term Expenditure Framework, and the size of the budget. The Ministry of Finance limits the budget ceiling. The budget ceiling is circulated to ministries, ministries to departments, and departments to outlay units. Under the bottom-up method, outlay units prepare the program and budget and send them to departments. Departments compile and refine it and send it to ministries wherever ministries build the necessary refinements and consolidate it, then forward it to the National Planning Commission. NPC builds some negotiations with ministries, including NPC and the Ministry of Finance, and forwards them to the Ministry of Finance. The Ministry of Finance consolidates the refined budget on the condition that cabinet ministers do some healthy discussion and arrive at an agreement. Finally, the Finance Minister, on behalf of the government, puts forward the budget to the parliament for approval where he gives speeches about the capital budget, recurrent budget, and funding supply for this year and next year. Once the budget is approved, the Ministry of Finance provides authorization for outlay to the "Secretaries" of the Ministries. Consequently, secretaries offer authorization letters to department heads and department heads to outlay unit chiefs. Outlay units pay budget for the approved programs. To release the budget, outlay units submit payment requests to the district treasury offices. District treasury offices make sure and enter the dealings into the treasury single accounts system that is an online/web-based central system. When the district treasury offices verify, they issue cheques against payment requests and relinquish them to the outlay units. Outlay units pay cheques to the involved vendors upon receipt. The Development Action Committee reviews the budget on a trimester basis. The Ministry of Finance reviews the middle term and typically The Parliamentary Committee conducts a review on budget implementation for its effective utilization. The Finance Comptroller General's Office commands district treasury offices to conduct an internal audit. The auditor general conducts the statutory audit to ensure its proper utilization, following rules and regulations. Finally, the Public Account Committee of Parliament reviews the auditor general's report. Federal budget documents are not just numbers but also represent the intentions, priorities, policies and allocation of revenues among different regions. Eventually, the federal budget may be a political, economic, and social statement of government policy. Nepal's federal budget system has several strengths such as multi-year forecasting, budget formulation and implementation tips, budget calendar, approved program spending, on-line budget submission, web-based budget release system, budget review and auditing system. However, the federal budget has flaws such as inadequate budget item targets, low capital and recurrent budget productivity, calendar violations, ineffective control systems, a lack of performance control, and biased and ineffective parliamentary management of the federal budget. The weaknesses in the federal budget system generate issues in their implementation. It may face fulfilling the trend of budget requests beyond the ceiling, budget disbursement in unproductive sectors under political influence, non-compliance with planning, budget disbursement in unapproved sectors, lack of priorities, delays in delegation of authority to related units, trend of end-of-year spending, and supernumerary internal transfers. The top-down and bottom-up approach of the federal budget system brings synergies between national level and local level needs as long as the federal budget system adheres to advanced budgeting, productivity and strong targeting programs, gears up the capital budget, improves the control system, strengthens parliamentary management, controls management, and follows the calendars. With the federal budgetary system, legitimate revenues could be needed to utilize the best interests of the country.