Measures taken to optimise expenses

The finance ministry cracks the whip to impose some sort of fiscal discipline

Budget: Planning for a study tour or organising an in-country training?

These activities, sources say, usually happen in the last quarter of the financial year, because government agencies tend to rush to spend the remaining budget allocated for non-developmental capital works.

To curb unnecessary spending, the finance ministry yesterday notified that it would review the preceding quarterly budget releases and expenditure, while strictly releasing the budget as per the budget utilisation plan.

Sources said that, if the released budget was not utilised, it had to be surrendered to the ministry.  In such cases, usually the allocation was re-appropriated, which means the budget released for one activity is used for another.

However, the ministry also notified that such re-appropriation would be restricted.

A finance ministry official said that government agencies should be spending about 25 percent of recurrent and non-developmental capital budget every quarter.

However, a review conducted by the ministry revealed that, in the last two fiscal years, about 33 percent of the annual expenditure was spent in the last quarters of the fiscal year (in the months of April, May and June.)

Recurrent expenditure includes salary, operation and maintenance costs, which is spent monthly.  But non-development capital budget include those expenses, like procurement of office equipment, human resource development, including study tour and trainings, among others.

The official said these expenses could be controlled at 25 percent but for the developmental capital budget, which is allocated for construction activities, the spending depends on the tendering process and work progress.  This means the notification only applies to recurrent and non-developmental expenditure.

Last July, the finance ministry also notified that invitations for participation in trainings, seminars and workshops by multilateral and bilateral  agencies may be accepted only if fully funded.

In the current fiscal year, no provision for budget has been kept for coordination meetings and annual ministerial conferences.

As the 2014-15 financial year enters the last quarter, government agencies have spent 33 percent of Nu 18.2B (billion), the total approved capital budget, of which the finance ministry already released 51 percent.

While the ministry has agreed in its annual performance agreement to utilise at least 90 percent of the total allocated budget for capital works, only 33 percent has been spent as of February this year.

During the mid year review of the agreement, finance secretary Lam Dorji said, as initial preparatory works are done in the first few months of the fiscal year, spending will improve towards the end of the year.

He also said that capital works are carried out in advance, while payments are made towards the later half of the fiscal year.

A total of Nu 40.3B was approved for this fiscal year and actual expenditure was Nu 18.5B, leaving a difference of Nu 21.7B.  However, the secretary said, variation would decrease as capital works are completed and current expenditure incurred during the remaining part of the fiscal year.

Meanwhile, for the 2015-16 fiscal year, there is a change in budget proposal guideline.  Government agencies now need to ensure that their proposal provides a narrative policy statement highlighting programmes and target as per the annual performance agreement.

This is being done to enhance the link between the proposed budget and target to be achieved as per the agreement.

To avoid adverse impacts of inflation, balance of payments and reserves, the government also aims to maintain a fiscal deficit of around three percent in the 2015-16.

By Tshering Dorji

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