SAGAR GHIMIRE

January 27: Over a dozen local governments have not presented their budget for the current fiscal year even after the end of first half of 2020-21, raising concerns over fiscal indiscipline at local levels.

A total of 13 local governments are yet to present their annual budget. All of them are from Province 2, according to the Ministry of Federal Affairs and General Administration (MoFAGA).

The delay in presenting the budget and getting it approved from the respective assembly not only goes against the provisions of the Intergovernmental Fiscal Arrangement Act and the Local Government Operation Act, but raises concerns over the breach of fiscal discipline by subnational governments.

Local levels that include rural municipals, municipalities, sub-metropolis and metropolis are required to present their budget (estimate of revenue and expenditure) for the upcoming fiscal year by Asadh 10 (10^thday of the Nepali calendar month of Asadh, which generally falls in the last week of June).

Excluding the expenses (not exceeding two-thirds of the expenditureof the current fiscal year) incurred when an appropriation bill is under consideration, local governments cannot make any expenditure without approval of the budget presented in their assemblies.

Elected representatives at local levels who fail to present the budget on time point out political disputes hampering the budget formulation process.

Mithila Bihari Municipality is one such local level which had struggled to convene its Municipal Assembly to get its budget for the current fiscal year 2020-21 approvedwithin the deadline of Asadh 10 (June 24 last year).  After months of political bickering, the municipality finally held its assembly nearly two and a half months later.

“The political disputes in our municipality delayed the process. As some members of another political party were bent on stopping the Assembly from congregating to prove that I have failed, we could not convene the Assembly on time,” said Anil Kumar Yadav, mayor of Mithila Bihari Municipality. “However, after weeks of negotiations with those trying to disrupt the Assembly, we finally succeeded in convening the Assembly and getting the budget approved after two and a half months,” he added.

Dhanauji Rural Municipality in Province 2 faces the similar fate. Political wrangling among the elected representatives is blamed for the failure to convene the village assembly which approves the budget.

“Wards should formulate and send their plans that need to be included in the budget. However, there are disputes in some of the wards among elected representatives,” said Ramwati Devi Mandal, deputy chairperson of Dhanauji Rural Municipality.

“We also have not been able to forge consensus in the village executive to call the village assembly as there are elected representatives from various political parties,” she added.

Political dispute is not the only reason that has prevented local levels from holding their assemblies or getting the budget endorsed on time. Covid-19, corruption and lack of administrative capacity are also other factors that have hit the process of budget formulation and presentation, senior MoFAGA officials said.

They also say that there is little they can do to pressurise subnational governments for timely approval of budget or rein in spending that is not duly approved from their respective assemblies.

“We are practicing a federal system where provincial and local governments are as powerful as the central government. So, we cannot intervene from the federal level and tell them what to do and what not to do. Our effort is limited to following-up on where the process of convening the assembly has reached,” said a senior official at the MoFAGA, requesting anonymity as he is not authorised to talk to media.

However, the central government has warned that it would suspend disbursement of grants, like complementary and special grants, to subnational governments that are yet to pass their budget.

According to the senior official, the ministry is now also mulling over a possibility of freezing bank accounts of the local government that fails to get its budget approved by its assembly.

Fiscal experts say that spending taxpayers' money without the elected assembly’s endorsement amounts to irregularity. “Whatever justifications are made, it is a disregard for the accountability and transparency,” said Khim Lal Devkota, a fiscal federalization analyst.

He said that the central government should stop providing financial grants to those local governments until they get their budgetsapproved from their assemblies.