Government Finance: Towards the Perpetuation of Government Programs

Currently two very important issues are in the focus of public discourse. A new foreign investment policy has recently been endorsed by the cabinet and a new “Agriculture Development Strategy” referred as ADS is also being debated on. These are important issues as both agriculture and foreign investment can serve as vehicles to carry Nepal towards economic development. Agricultural growth can help bring a majority of the population from poverty to sufficiency while foreign investments can provide these, now, better-off individuals with new things to purchase and avenues for investment. Foreign investments can also serve to bring in much needed expertise, capital, and technology in a fledgling economy like Nepal’s and greatly enhance the expansionary capacity of its individuals. The complementary roles that these two sectors of the economy can play will help propel Nepal to meet its goal of graduating to a Developing Nation.

In order for Nepal to increase the capacity of agriculture sector and foster an environment that can be receptive of foreign capital, government intention and policy should be geared towards playing the role of facilitator rather than regulator. However, the current policy regime seems to be geared towards the latter as evinced by: (i) the very existence of the National Planning commission and (ii) the seeming perpetuation of government endorsed programs. While the first point will easily accommodate a discussion on its own, the second point is pertinent to the discussion on recurrent and capital expenses.

The Ministry of Agricultural Development (MoAD) and its related departments receive a certain part of the government’s budget with respect to priority set by the MoAD according to the Ministry of Finance’s approval. This approval may hinge on the National Planning Commission’s views on priority sectors. However, most of this budget is simply used to either bring a new program to existence or as costs for running existing institutions; only a small part of the budget is actually used to increase the capacity of these institutions or the recipients of the institutions services. According to the Planning Division of MoAD, Rs10,889.10 million was gobbled up in recurrent expenses while only Rs790.3 was used in capital expenditure in the 2012/13 fiscal year. This means, while MoAD may have set aside 20% in extension activities, 25% in fertilizer subsidy programs (which may improve the quality of land and therefore be considered capital expenses), 10% in agriculture research, a large part of these allocations may simply be used up to cover the cost of staff, building, administrative costs and other such activities. Hence, one may find all the proper and required activities being carried which, paradoxically, deplete the nations finance and burden taxpayers more without benefitting or bettering the situation of the program’s target addressee. One can find a similar situation in the Foreign Direct Investment regime as well; various organizations simply repeat functions being carried out by other entities.

The cases from agriculture and investment related ministries are mere instances of how there are redundancies or lack of gusto in various government initiated projects. Unfortunately for Nepal, instances of such discrepancies are widespread and there are many government institutions that simply duplicate the work without adding any benefit to the service recipients and even add to their woes due to appalling inter-departmental or inter-ministerial communication. While one cannot say that the government has not been active at trying to bring the country from a position of stagnant growth to that of development, the programs that have been evinced to meet the goals of economic betterment and development simply seem to serve the purpose of a façade rather than that of implementation.

(The article was published in The Himalayan Times, Perspectives on March 29, 2015. )

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