The government carried out significant budget transfers in the past one month, primarily to finance its internal debt.
According to an official of the Ministry of Finance (MoF), of around Rs 31 billion released by the ministry during mid-March and mid-April, Rs 27 billion was borne from the budget transfers mainly to pay back principal and interest for the domestic debt.
Due to the shortfall of revenue collection than the targeted amount, the government has been struggling to manage the funds necessary for regular financial liabilities. With only two and a half months left for the completion of the current fiscal year, the government has collected mere 50 percent of Rs 1.403 trillion targeted revenue for the fiscal year 2022/23.
A budget transfer means moving funds from one assigned program or project to another. In many cases, government agencies seek to adjust budgetary allocations after being unable to spend the earmarked money.
According to the MoF, Rs 881.53 million out of the budget transfers has been provided to the Ministry of Foreign Affairs to purchase electronic passports. Similarly, Rs 850 million was transferred from the fund allocated for the construction of the Budhi Gandaki Hydropower Project to the river control projects and a number of irrigation related projects.
Likewise, the MoF released Rs 3.32 billion to Agriculture Inputs Company and Salt Trading Corporation to supply subsidized chemical fertilizers to farmers.
Citing increasing cases of irregularities in the bureaucratic system, the Office of the Auditor General (OAG) in its 60th annual report has raised concerns over the massive budget transfers conducted by the government offices. The government carried out a budget transfer of Rs 196.41 billion in the reported year of 2021/22.
According to the OAG report, the cash transfers in 10 programs in the given fiscal year were not included in the budget heading. “It breaches the budget principle that bars the government bodies from making such cash transfers,” reads the report.
This year, the government has been carrying out budget transfers mainly to pay back the public borrowings. Just between mid-December and mid-January, a total of Rs 22.02 billion was transferred to pay the financial liabilities borne on treasury bills.
Government records show that the country’s public debt has been increasing every year. By mid-February of the current fiscal year (FY 2022/23), the debt liability of the government had reached about Rs 2 trillion.
Public debt increased by about Rs 32 billion during the seven months since June 2022. Of the amount, internal debt was Rs 996 billion, while the amount in foreign debt stood at Rs 1.0473 trillion.
The government paid Rs 117.42 billion as the principal and interest of public debt in the last fiscal year (FY 2021/22). Of this amount, Rs 72.80 billion was paid as the principal amount and Rs 44.61 billion as the interest.
Public debt has almost doubled in the last five years. In the fiscal year 2018/19, public debt was Rs 1.048 trillion. The debt reached Rs 1.4334 trillion in FY 2019/20, Rs 1.7378 trillion in FY 2020/21 and Rs 2.013 trillion in FY 2021/22.
