Public financial management (PFM) is the way certain laws, systems, processes and rules are used by the authority of a state to raise funds, allocate them to different departments and levels, use them for public expenditures and , ultimately, to be accountable. and transparency on these payments and receipts. This is done in the annual budget cycle which shows the environment in which these practices are followed.
Nepal’s level of public finance management is similar to other countries of its level in terms of per capita income but has a slight advantage in some dimensions. This can be seen through the Open Budget Partnership’s Open Budget Survey (OBS) report. The 2019 OBS report reduced Nepal’s score to 41 in transparency, 22 in public participation and 48 in budgetary control. It reveals the current picture of government transparency and accountability in budget planning and related information to the public.
This means that a change is essential. But how can this be done?
The reason why Nepal has a low ranking in the OBS is that it did not release pre-budget statements and reports throughout the year in a timely manner, which would have explained its policies and results. Oversight remains weak during the budget planning and implementation phase in Nepal. No platform is actively engaging with underrepresented or vulnerable groups in the government’s planned consultations for the budget, which should be prioritized.
Another reason for the low ranking could be influences from the past when budget delays were contributed by political stalemates. In the current scenario, due to high vote fragmentation and low commitment to pursue political reforms, governments have overriding policy objectives with no consensus on how to address them. .
Transparency and accountability in a country’s budget processes can be increased through an approach known as open budgeting, in which a country publishes data on public platforms for stakeholders to freely access. It can help reduce corruption and give us a way to compare it with other jurisdictions.
We can see that Nepal is already trying to fit in with the approach. A system has been established which unifies the bank accounts of the Government of Nepal, known as the Treasury Single Account (TSA). This processes budget expenditures in minutes, which previously would have taken hours or even days. There is also a Public Expenditure and Financial Accountability Framework that has been established and is considered an internationally approved tool for measuring public financial management performance.
Civil Society Organizations (CSOs) have been supported by the government with assistance from the World Bank through the Program of Accountability in Nepal (PRAN) in which CSOs are trained on accountability tools and ways to inform citizens about budget processes and targets. and budget objectives.
Another major way to improve the situation of public financial management is the process of pre-budget submission for consultation during budget formulation by the Ministry of Finance of Nepal. There is also a provision for a public hearing for budget proposals where citizens can testify. There is, moreover, the electronic consultation which was ensured by the ministry for the citizens during the execution of the budget.
Supreme audit institutions also engage with the public in Nepal during the budget process. The Office of the Auditor General, the Ministry of Finance and Policy Research and Development Nepal have established a program of participatory audits at the local level. Therefore, the 2016 five-year plan was audited by citizens through a group of CSOs and in 2017 an audit was generated for the earthquake affected areas involving eight CSOs.
However, much remains to be done to improve the state of public financial management in Nepal. This can be seen through what is happening in the state of Assam in India. The World Bank Assam State Public Finance Institutional Reforms (ASPIRe) project in 2017 was set up by the state government.
This program gave way to a government procurement law and increased disclosure for transparency and accountability. An e-budget application was also launched, which not only helped in public finance management but also tried to save the environment by saving paper that is thrown away in printing books for the budget. The same can be followed by Nepal.
Moreover, the decrease in OBS ranking can be rectified by producing reports online and quickly, which will at least lead Nepal to reach previous levels of development in the sector. In 2021, Freedom Forum in collaboration with PEFA conducted a consultation for a strategy for civic engagement in public financial management in Nepal with around 200 stakeholders.
These individuals, organizations and groups have suggested recommendations in the current public financial management climate for the Government of Nepal and relevant CSOs. All these recommendations for greater public participation in the management of public finances can be reviewed by the government with a view to their implementation.