Govt made sizable budget transfers to pay off the national debt last month

KATHMANDU: In the last month, the government made significant budget transfers, primarily to finance its own debt.

An official from the Ministry of Finance (MoF) claims that out of the approximately Rs 31 billion released by the ministry between mid-March and mid-April, Rs 27 billion came from budget transfers and was used primarily to repay the principal and interest for domestic borrowing. .

The government has had trouble managing the money required for routine financial obligations due to the revenue collection shortfall compared to the desired amount. There are just two and a half months left in the current fiscal year, and the government has only collected half of the Rs 1.403 trillion in revenue it had hoped to in that time.

Transferring money from one designated program or project to another is known as a budget transfer. After being unable to use the designated funds, government organizations frequently try to change budgetary allocations.

The Ministry of Foreign Affairs has reportedly received Rs. 881.53 million from budget transfers for the purchase of electronic passports. Similar to this, Rs 850 million was moved from the fund designated for the Budhi Gandaki Hydropower Project to the river control projects and a number of irrigation-related projects.

The MoF also released Rs 3.32 billion to Salt Trading Corporation and Agriculture Inputs Company to provide farmers with subsidized chemical fertilizers.

The Office of the Auditor General (OAG) has expressed concern over the significant budget transfers made by government offices in its 60th annual report, citing an increase in cases of bureaucratic irregularities. In the reported year of 2021/22, the government transferred Rs 196.41 billion from the budget.

The OAG report states that 10 programs’ cash transfers for the specified fiscal year were not accounted for in the budget heading. According to the report, “It violates the budget principle, which forbids the government bodies from making such cash transfers.”.

Budget transfers have been made by the government this year primarily to pay off public debt. A total of Rs 22.02 billion was transferred just to cover the financial obligations incurred by the treasury bills between mid-December and mid-January.

According to official records, the nation’s public debt has been rising yearly. Approximately Rs 2 trillion worth of the government’s debt was owed as of mid-February of the current fiscal year (FY 2022/23).

In the seven months since June 2022, the public debt increased by about Rs 32 billion. The amount of internal debt was Rs 996 billion, while the amount of external debt was Rs 1.0473 trillion.

In the most recent fiscal year (FY 2021/22) the government paid the principal and interest on the public debt in the amount of Rs 117.42 billion. Of this total, Rs. 72.80 billion was paid as the principal and Rs. 44.61 billion as interest.

In the previous five years, the public debt almost doubled. Public debt totaled Rs 1.048 trillion in the fiscal year 2018–19. In the fiscal years 2019–20, 2020–21, and 2021–2022, the debt totaled Rs 1.4334 trillion, Rs 1.7378 trillion, and Rs 2.013 trillion, respectively.