BUDGET RELEASED FOR PROJECTS

BUDGET RELEASED FOR PROJECTS DESPITE REIMBURSEMENT BACKLOG
Kathmandu, 26 Sept.: The Ministry of Finance (MoF) has approved releasing the first quarter budget for foreign aid-funded projects that have failed to get reimbursement of their expenditure from their donors in violation of set norms, The Kathmandu Post reports.
The Financial Comptroller General's Office (FCGO), the main agency responsible for the government's treasury operation, recently released the budget for Q1 of the current fiscal year for all P1 (priority one) projects that include projects failing to get reimbursement.
Since fiscal 2009-10, the government has been maintaining the policy of not releasing the budget for projects failing to get reimbursement of their expenditure from the donors on time. According to sources, the decision to release the budget for such projects was taken following the chief secretary's order citing the people's development needs.
As per the set criteria, the FCGO cannot release the budget for foreign-aided projects that fail to get reimbursement till mid-March. "We released the budget for the first four months of this year after the chief secretary told us to do so for P1 projects," said Narayan Niraula, deputy financial comptroller general.
After many projects sought the budget for development activities urgently, the Finance Ministry had decided to release the budget for P1 projects despite the FCGO's criteria. The government had been lenient in releasing the budget last year too after the projects cited urgency.
Bodh Raj Niraula, budget division chief of the MoF, said that the budget was released even though some projects had failed to get reimbursement so that development activities would not be halted. "We also considered the progress the projects have made in reporting on time and seeking reimbursement relatively faster as a result of the policy of not releasing the budget," he said. He added that the ministry, however, would be stringent from the second four months onwards.
The government has allocated Rs 344.49 billion for P1 projects this year, amounting to 89.50 percent of the total national budget. The government is committed to not allowing shortage of funds for P1 projects. The FCGO is not sure how many P1 projects have failed to get reimbursement as of the eighth month of the last fiscal year.
The FCGO has now decided to monitor the projects that got their budget released without completing the task of reimbursement. Niraula, however, said that the policy of not releasing the budget for the second and third four-month periods without getting reimbursement as of the last fiscal year and Q1 of the current fiscal year respectively was intact. The government was soft on releasing budget last year too after
The government in 2009-10 had introduced a policy of not releasing the budget for projects that fail to get reimbursement as the country witnessed a huge balance of payments deficit. Delays by projects to obtain reimbursement from their donors aggravated the BoP situation in the country. When the BoP deficit was around Rs 23 billion, the funds to be reimbursed from the donors in fiscal 2009-10 amounted to Rs 32 billion.
According to the FCGO, projects have received most of the outstanding reimbursements, or Rs 26.93 billion out of Rs 32 billion.
Of the total outstanding reimbursement as of fiscal 2010-11, projects have received reimbursement of Rs 5 billion so far. During the first and second months of the current fiscal year, the country received Rs 1.72 billion in reimbursement, but it is not clear whether it was for the last or previous fiscal year, according to the FCGO.
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