The finance ministry’s idea of presenting a supplementary budget has suffered a setback for three months because of the April 10 election to the Constituent Assembly. The election code of conduct seeks to ensure free and fair polls by prohibiting any action that may affect the electorate’s choice through unfair means, like doling out money on one pretext or another, or announcing projects and programmes likely to sway voters. After the election, only slightly more than two months will remain for the supplementary budget to be announced before the current fiscal year runs out. Finance minister Dr Ram Sharan Mahat had informed the interim parliament on January 16 that the government would have to announce a supplementary budget to meet the additional expenses that have been caused by “the oil price hike and new political commitments”. He stressed the necessity of the mid-term budget “to implement the 23-point political agreement, conduct the CA polls and pay off the country’s debt to the Indian supplier of oil”.

In the first five months of the year, the government has spent most of the amount of deficit financing, as well as of overdraft ceiling, projected and sanctioned for the entire fiscal year. The government has been trying to get budgetary support from donors, particularly with more discretionary power over its use. It has resorted and will resort to transfers

of funds between account heads to manage its budget difficulties. But this method can go only so much, because there are practical limits, as its resource needs are considerable. It is considering raising the existing 10 per cent ceiling for inter-account transfers. Such transfers will mean less of development in other sectors, and capital expenditure, which has almost always turned out to be much less at the end of the year than the original projection, will suffer a lot. But this internal juggling of the budget allocations will still leave a huge gap to be filled, for which the government will need to generate extra resources of its own, get support from the donors, or resort to greater domestic borrowings.

Unlike what the finance minister claimed, most of the additional financial needs could have been anticipated at the time of budget presentation. However, some allowance can be made for unexpected liabilities. Such a major reordering of the national budget will have the effect of altering it out of recognition. And this reflects poorly on any finance minister

and his top team of bureaucrats and advisers. The finance minister has also hinted at the possibility of altering the duty structure if all other measures fail to generate the needed resources. Another example of the lack of anticipation is reflected in the delayed idea of supplementary budget, probably conceived not much before the election code of conduct was enforced. Everybody knew the election was going to be held within this Nepali calendar

year. This means now that the government will have to bring in a supplementary budget towards the close of the fiscal year just to legitimise every change made without it. Questions of propriety and financial discipline may then arise.