The Dark Reality Behind Budget Formulation in Nepal's Provinces

As we reach the second term of federal practice, there are many comments regarding provincial governments. In particular, the irregularities seen in the budget formulation process, its allocation, and implementation are discussed externally, but the inner depths and behind-the-scenes games are even more terrifying. The experiences I gathered while serving as the Minister of Physical Infrastructure Development of Koshi Province are, in many cases, a matter of serious review not only for me but for the entire governance system.

Budget formulation is not just about addition and subtraction of numbers; it is also a test of the people's hope, the province's needs, and the morality of political leadership. However, I have seen up close where we are failing in this test and how everyone from the bureaucracy to the political mechanism has held it hostage to settings and self-interest.

Theoretically, there is a fixed method for budget formulation. Now, the concept of a project bank has emerged. During my tenure, this was just beginning. The method says—first of all, projects should be selected from offices, analyzed, the needs of local levels and constituencies should be prioritized, and the ministry should coordinate them. But in practice, this process has proven to be nothing more than a ritual.

We have a rule that the budget should come only after projects are entered into the project bank, but if influential leaders, powerful lawmakers, or the cronies of ministers want to insert a project, the practice of entering it with a 'back date' is still prevalent. There is collusion between employees and political leadership in this game of breaking the rules. As a result, projects with genuine needs are left behind, and projects in the pockets of the influential get priority.

• Bureaucratic dominance and project bribery

We only blame the political leadership for budget formulation, but the role of the bureaucracy is even greater. In my experience, employees influence more than 60 percent of the budget. Especially, no budget can move forward without the interest of the Ministry of Finance employees.

This may surprise many, but when entering the budget, the minister is forced to set quotas for everyone from the peons to the secretary of the Ministry of Finance. If their interests are not met, the budget of the concerned ministry is not even entered. This is a kind of project bribery. The budget process is kept on hold until they are given a certain share of the budget.

Why does this happen? The main reason is political instability. Employees know that this minister is here today and another will come tomorrow. But they remain there. Due to the mentality of 'the minister will leave anyway, why should we care?', employees manipulate the minister and impose their own interests. When a minister talks about the rule of law, the technical and administrative levels of the Ministry of Finance work to obstruct them and stall the budget.

• Budget based on access

What the budget will be like depends on its size and political pressure. If the budget size is large, some strategic and large projects can be included, but when the budget is small, it is entirely distributive. Due to the pressure to keep all lawmakers happy, satisfy leaders of one's own party, and give a share to the opposition, the budget is scattered like grains of rice.

We have an invisible tradition of lawmaker quotas. The culture of ruling party lawmakers grabbing the budget based on their access and the opposition bargaining by saying 'we will not let the parliament run if we don't get the budget' has caused development priorities to disappear. Sectors like tourism, agriculture, and human resource development are overshadowed, and the budget is wasted on small road projects.

My own body has felt how stressful the budget formulation period is for a minister. For about a month before presenting the budget, I faced so much pressure from my own party leaders, cadres, lawmakers, and coalition partners that it is difficult to express in words.

In normal conditions, my blood pressure would be around 120/90, but during the budget session and when finalizing the budget, my pressure would rise to 150/110. This was not just due to work pressure, but the result of mental stress caused by trying to establish the rule of law and resisting the pressure of interest groups. Every lawmaker wants a budget of millions for their constituency, but the ministry has limited resources. The worry of how to distribute those limited resources fairly makes the minister a patient of high blood pressure.

• Incompetence and whims of political leadership

Sometimes the budget also runs on the whims of the leadership. Last year, the budget in Koshi Province was brought according to the wishes of the Chief Minister himself. For example, only 10 million was allocated for a large project like the Biratnagar-Biratchok road, whereas it needed more than 150 million. The provision of allowing any amount of budget to be put into multi-year projects is being misused to leave projects in limbo. The tendency of the Chief Minister or Finance Minister to hoard the budget in their own area and ignore others is attacking the very essence of federalism. The budget or project bank concepts brought by the current government are also largely unrealistic. The ruling party itself is not ready to implement this.

• What is the priority now?

As far as my study and information go, the budgets of Koshi Province for the past few fiscal years were good. During the tenure of the then Finance Minister Indra Bahadur Angbo, multi-year road, bridge, and building projects were given to every constituency. Those projects were also of long-term importance. Later, when I worked as a minister and now while reviewing from the outside, I have seen one thing clearly—Koshi Province must increase investment not only in physical infrastructure but also in human development. Roads, sewers, and buildings are not the only development.

Unless we emphasize social development, agricultural production, and tourism, the province cannot be prosperous. The project bank must be made truly technology-friendly and transparent. The practice of entering projects with back dates and adding projects based on access must be completely prohibited. Unnecessary interference by Ministry of Finance employees in budget formulation and the tendency to demand quotas must be strictly stopped. Instead of distributing the budget like grains of rice, the budget should be focused on large projects in agriculture, tourism, and education that make the province self-reliant. Instead of increasing only the budget of the Ministry of Physical Infrastructure, the budgets of the Ministry of Health, Social Development, and Agriculture should be prioritized.

The budget is a document of fair distribution of state resources. To improve the pressures and distortions I faced while being a minister, it is not enough for one person or minister to try; a major surgery is needed in the overall political culture and administrative mechanism. If we cannot break the setting and web of interests in budget formulation now, questions will continue to be raised about the justification of federalism.

It is the need of the hour to use the taxes collected from the blood and sweat of the people not for the benefit of a handful of influential people, but for the prosperity of the entire province. My experience says—until politics is clean, the budget cannot be clean, and until the budget is clean, the fruits of development cannot reach the lower-level people.

– Based on a conversation with Upreti, former Minister of Physical Infrastructure Development of Koshi Province