Laxmi Capital News
Provinces receive budget formulation guidelines

The provincialadministrations have been given guidance for preparing the budget as theprovinces have recently been formed following the recently held provincialassembly election and the schedule to present the budget for next fiscal isdrawing closer.

The provincialgovernments have to present their budget to the provincial assembly(Parliament) by mid-June or a month before new fiscal year. As per provision ofConstitution, federal government presents its budget two weeks ahead of theprovincial budget and provinces have to give a final shape to their budget bymaking necessary adjustments as per federal budget.

The local governmentshave to submit their budget to the budget assembly 20 days ahead of the fiscalyear calendar. The provincial governments need to formulate their budget in asimilar manner to that of the federal government. The Ministry of Finance ofthe federal government has drafted the Provincial Fiscal Procedure Act tofacilitate the provinces to provide the guidance for budget formulation.

The draft act wasinitially prepared by the Financial Comptroller General Office (FCGO), with thefinal touches given by the MoF. “The provincial parliaments can endorse thisdraft after making necessary adjustments,” Damodar Regmi, joint financialcomptroller general told The Himalayan Times. “Provincialgovernments are pressed for time as the clock is ticking for formulation ofbudget.”

The draft act has aprovision to form a resource committee like in the federal government. Theresource committee will determine the need of resources to run theadministrative and development works.

While the provinces areindependent in planning and budgeting, they require the legal framework for itand the Provincial Fiscal Procedure Act has been drafted to facilitate theprocess. This draft act has a provision to formulate the annual budget based onthe medium-term expenditure framework (MTEF).

MTEF is a tool toestimate three years’ revenue and expenditure requirements. The federalgovernment develops budget based on MTEF framework. Under MTEF, the federal andprovincial governments have to estimate the resources for the next fiscalbudget from the resource committee by mid-February. Likewise, by the end ofFebruary, the ministries have to be given the guidance and ceiling of theresources. Budget discussions should be concluded within three months — betweenmid-March and mid-June.

As financialaccountability and transparency is related to the expenditure of lower layersof administration, the draft act has recommended formulation of the ‘FinancialResponsibility Act’, to ensure effective and efficient utilisation oftaxpayers’ money.

The draft act hasincorporated a wide range of issues related to budget formulation process,budget presentation in provincial assembly, providing spending authority toimplementing agencies, accounting and reporting of expenses and internal andfinal audit and settlement arrears.

Source: The Himalayan Times, 22ndFebruary 2018

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