2007年-世界发展银行全球_Managing_Public_Finances_for_a_New_Nepal___A_Public_Finance_Management_Review_142页_2mb

Summary of Nepal's Public Finance Management Review

Core Content

This document presents a comprehensive review of Nepal's public finance management (PFM) systems, highlighting the country's development challenges and opportunities. It outlines the key achievements and challenges in the PFM landscape, focusing on how to improve fiscal governance and public spending effectiveness.

Main Points

1. Political and Economic Context

• The People's Movement of 2006 (Jana Andolan II) created a sense of hope for a new Nepal that is peaceful, inclusive, just, and prosperous.
• Nepal has made progress in poverty reduction and economic growth, but faces major investment climate constraints such as weak infrastructure, governance, trade facilitation, and labor laws.
• Despite economic growth in neighboring countries, Nepal's per capita growth has stagnated around 1 percent.
• Large liquidity from remittances has not translated into significant investment due to weak fiscal frameworks.

2. Role of Public Finance Management

• PFM is crucial for achieving Nepal's development goals and ensuring fiscal stability.
• The review is conducted by the Government of Nepal (GoN) and the World Bank, guided by the National Planning Commission (NPC) and Ministry of Finance (MoF).
• The report is structured into three parts:
  • Development challenges and PFM trends
  • Composition and effectiveness of expenditure programs
  • Financing, formulation, and execution of the budget

3. Key Achievements in PFM

• Fiscal Stability: Nepal has maintained fiscal and macroeconomic stability despite political and economic shocks. This is attributed to the Medium-Term Expenditure Framework (MTEF) and performance-based budgeting.
• Alignment with Sector Strategies: Expenditures in education and health have gradually aligned with sound sector strategies, supported by donor engagement in sectorwide approaches (SWAps).
• PFM System Design: A reasonably well-designed PFM system exists, with a credible budget as a policy tool, a solid control framework for aggregate outturns, and a reasonable control system at the transaction level (especially for payroll).
• Procurement Reforms: A Procurement Act was enacted, and anti-corruption legislation was updated to allow bidders to report corruption with harsher penalties.
• Resilience to Political Volatility: PFM systems have proven resilient to political changes.

4. Key Challenges

• Fiscal Space: Limited fiscal space due to high recurrent spending, a large revenue gap, weak external assistance, and self-restraint in domestic borrowing.
• Debt Sustainability: Despite a debt-to-GDP ratio that is not high by international standards, Nepal is classified as "high risk of distress" due to macroeconomic uncertainties and contingent liabilities.
• Sector Expenditure Gaps: There is a need to improve the effectiveness of sector expenditure programs, especially in education and health, by addressing quality and efficiency.
• Disparities in Spending and Outcomes: Disparities across districts and between rich and poor households persist, fueled by unequal access to resources and services.
• Implementation Gaps: There are significant gaps between PFM rules and actual practices, including inefficiencies and corruption.
• Weak Demand for Budget Information: There is a weak demand for transparent and accurate budget and financial information, both from government and external stakeholders.

Key Information

Fiscal Trends and Performance

• In 2004/05, central government revenues were 13% of GDP, and expenditures were 16.5% of GDP, with 3.5% of GDP being the deficit.
• External grants accounted for 2.75%, net external financing for 0.5%, and domestic financing for 0.25%.
• Total external assistance was 5.25% of GDP, with only 3.25% going through the budget.
• Primary deficit was reduced from 5% to 2% of GDP between 1997/98 and 2003/04.
• Capital expenditures fell from 7.5% to 4.5% of GDP.
• Debt-to-GDP ratio is around 50-60%, mainly composed of external debt.
• Actual revenues and current expenditures reached 91% of their budgeted values, while capital expenditures were only 77%, grants 66%, and net external financing 48%.
• 47% of the total budget is spent in the last trimester of the fiscal year.

Sectoral Expenditures

• Education: Accounts for 19% of the budget, with net primary enrollment increasing from 57% to 72% (and secondary enrollment from 9% to 15%) between 1995/96 and 2003/04.
• Health: Accounts for 5% of the budget, with under-five mortality decreasing from 118 to 65 per 1,000 live births and infant mortality from 79 to 51 between 1996 and 2006.
• Local Roads: 1.5% of the budget has led to improved access to all-season roads for over half the rural population.
• Agriculture: 5-6% of the budget has contributed to rebounded sector growth.

PFM System Issues

• PFM systems are fragmented, with over 12,000 bank accounts for budget management and 800 accounts for extrabudgetary entities.
• There are persistent implementation gaps, including inefficiencies and corruption.
• Decentralization is not effectively supported by the central government and bureaucracy.
• The lack of elected local bodies has weakened the push for decentralization.
• PFM reforms have not significantly improved system performance, as the formal system remains stable despite changes.

Recommendations

• Expand fiscal space by improving revenue collection and managing external assistance.
• Improve debt management and ensure sustainability.
• Enhance sector expenditure programs by focusing on quality and efficiency.
• Address disparities through targeted investments and formula-based allocations.
• Refine PFM systems by improving laws, regulations, and training for civil servants.
• Promote transparency and ensure better demand for budget and financial information.

Conclusion

The review concludes with a four-point agenda for improving public finance management, including fiscal strategy, expenditure policies, PFM strategy, and aid effectiveness. It emphasizes the need for a more resilient and effective PFM system to support Nepal's development goals and address ongoing challenges.