Himalayan News Service

Kathmandu, May 29:

Economists here today at a programme to present a report by High-level Government Expenditure Commission — headed by Prof Dr Bishwambher Pyakuryal that was formed some five months back — catagorically said that the ‘security situation’ will have a huge impact on economy in the days ahead. “If the security situation could not be improved in coming years, Nepal could not achieve the required economic growth rate, millennium development goals (MDGs) and poverty reduction target.

“The report presented by the commission is the Geeta for forthcoming budget,” said Madhukar SJB Rana, finance minister, adding that the recommendations would be effective tools for refurbishing works of ministry of finance.

Rana promised that the ministry would move ahead effectively to maintain financial statistics and recurrent expenses. “It will work towards better performance of budget and zero-budgeting,” he added.

Dr Shankar Sharma, vice-chairman of the National Planning Commission, said the suggestions presented by the commission would be instrumental in driving the public expenditure policy ahead effectively. He said that the economic performance would highly depend on security situation and implementation of economic po-licies. “Recurrent expenses of the government would not go down,” he added.

Chairman of the commission Prof Pyakuryal on the occasion, said that the proportion of regular expenses of the total expenses have increased and the share of development expenses has gone down in recent times that may create instability in social and economic targets.

He said that the recommendations made in the Public Expenditure Review Commission (PERC) are not being implemented. “The recommendation of maintaining 70 per cent regular expenses of the total revenue and limiting seven per cent for security expenses are not being followed up,” he said.

Pyakuryal said that foreign aid is the major source to bridge the gap in budget deficit as foreign aid alone contributes about 50 per cent in development budget. “The commission has also suggested redefining the role of donors and state.”

“Despite foreign aid’s crucial role in poverty reduction, it does not seem to be used effectively,” the report stated, “If peace be restored, the GDP growth rate will post a record 6.2 per cent.”

The report further states the current problems like ad-hoc accounting system, not proper recording of foreign aid in auditor general’s report, lack of foreign aid data and weak maintenance of revenue collection that have contributed to aggravate economic probelms.

Similarly, the government-owned enterprises have not been able to audit the financial statements for over four years that has created huge financial problems, the commission’s report highlighted. According to the report, use of foreign aid effectively is not commensurate with aid flow in Nepal and enormous amounts are spent on Technical assistance with questionable results.

Kaushalendra K Singh, member of the commission, said that the irregularities of the government is to the tune of Rs 34 billion which is more than one third of our total budget. In such a situation, we need to have sound accounting system maintaining financial discipline. Nepal Rastra Bank and public enterprises generate profits and it is not distributed. NRB has over Rs 5 billion profits that needs to be transferred to national account, he suggested.