CHAPTER 3
Public Expenditures: Trends and Composition during 1999–2003
his chapter reviews the patterns of public expenditures in various sec- tors with a particular focus on the agricultural and rural sectors. In addition to reviewing actual expenditures, we provide a brief overview of the budgetary process used to allocate a broad portfolio of funds to differ- ing objectives, including promotion of the agricultural sector. A key objec- tive of the chapter is to examine patterns in the geographic distribution of public expenditures, an important policy issue in Nepal.
T
The Budgetary Planning and Implementation Process, 1999–2003 The budgetary process in place during the review period was as prescribed by the Constitution of Nepal of 1990, then in effect, and the Financial Adminis- tration Act of 1998. Under this system, the Ministry of Finance (MOF) of the Government of Nepal submitted budget estimates for the upcoming fiscal year before the joint session of the parliament. Key agencies involved in the budgetary process were the MOF, the National Planning Commission (NPC), the line ministries, and the departments and projects functioning under each of these ministries. As indicated before, the budgetary process today remains the same as before; the only difference is that the budget is now submitted to Nepal’s Constituent Assembly for approval rather than to the parliament, which no longer exists.
The national budget is made up of a “regular” and a “development” bud- get. The regular budget includes all expenditures of a recurrent nature (for example, administrative and security expenses), while the development bud- get includes all projects and programs related to production or output. Fur- ther, although the MOF plays a leading role in preparing the regular budget, the NPC takes the lead in finalizing the development budget. However, the process by which each budget is formulated and the funds appropriated and spent is guided by the Financial Administrative Act of 1998. This act requires each government agency to formulate a budget for the forthcoming fiscal
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