March 24:  Stakeholders have underlined the need for effective public finance management (PFM) by ensuring transparency, putting in place better reporting standards and strengthening institutions involved in public spending.

Speaking at an interaction programme on ‘Public Finance Management’ organized by the Society of Economic Journalists-Nepal (SEJON) with the support of Public Expenditure and Financial Accountability (PEFA) secretariat on Friday (March 22), they also pointed out various challenges for effective public finance management in the new federal system of the country.

“As the country is implementing the fiscal federalism, there are mainly challenges related to institutional capacity, fiscal capacity and technical capacity for the effective public finance management,” SEJON quoted Baikuntha Aryal, secretary at the National Natural Resources and Fiscal Commission (NNRFC), as saying.

“For the allocation efficiency of resources, the capacity of finance ministry alone is not adequate. All spending agencies should have similar capacity,” he added.

Also speaking at the interaction, Hari Saran Pudasaini, a joint secretary at the Ministry of Finance (MoF), pointed out the problem of lack of database and reporting system at the sub-national level. He also said that the lack of functionaries at the local levels have led to the poor execution of capital budget.

Former Financial Comptroller General Suresh Pradhan warned that lack of proper accounting, recording and reporting system at local levels could lead to financial indiscipline.   

Sushil Pandey, coordinator at the PEFA Secretariat, said that public finance management in recent years is getting linked with the macro-economy of the country, rather than limiting it to budget cycle. “The public finance or spending should be aimed at increasing social equity, maintaining financial balance and ensuring justifiable results,” said Pandey.

Franck Bessette, lead financial management specialist at the World Bank Office in Nepal, said that having the right and experienced people able to prepare, discuss and implement the budget and do the procurement works at the local levels in the new federal system remains a challenge.