Government Reverses Decision on Budget Transfers in Final Month of Fiscal Year
The government has overturned its earlier decision to prohibit budget transfers during the final month of the fiscal year. This change comes despite the government's previous commitment, announced in the annual budget for FY 2023/24, to restrict such transfers to maintain fiscal discipline.
Initially, the government had declared that no budget transfers or amendments to predetermined programs would be allowed from mid-June to mid-July. This measure was intended to ensure fiscal responsibility and prevent last-minute reallocations that often undermine the effective use of resources. The budget clause for FY 2023/24 clearly stated, "If contracts are not awarded for development projects by mid-November, the allocated budget will not be disbursed for such projects. In addition, the trend of transferring budget allocated for the projects targeted in remote areas in alternative sectors will be discouraged."
However, political pressure from influential parties and high-level bureaucrats has led the Ministry of Finance (MoF) to permit last-minute budget transfers almost every fiscal year. In a Cabinet meeting last Monday, this prior decision was annulled, allowing government offices to proceed with budget transfers. Finance Minister Barshaman Pun proposed the reversal, citing the need to provide necessary funds for development projects and manage administrative costs.
MoF officials explained that the government is under pressure to fund development projects that are facing financial shortages. Additionally, the government needs to secure financial resources to pay regular salaries to government employees due to lower-than-expected revenue collection.
The Office of the Auditor General (OAG) reported substantial budget transfers by government offices almost every year. For instance, in FY 2022/23, the government reallocated Rs 41.39 billion from unused capital expenditure funds to other areas. Furthermore, between mid-April and mid-May of this year, the government disbursed an additional Rs 3 billion to various authorities through budget transfers.
Despite these transfers, the Financial Comptroller General Office (FCGO) has barred all three tiers of government from making unnecessary expenditures in the last week of the fiscal year. However, this latest decision suggests that the government may breach even the guidelines set by the FCGO, which are designed to uphold financial discipline.
The recent policy shift highlights the ongoing challenges in balancing fiscal responsibility with the practical needs of funding development projects and managing administrative expenses, especially in the face of political pressures and revenue shortfalls.
