Austerity is good but the government has created more responsibility

The government’s seemingly contradictory policies – massively increasing the operating budget while promising austerity measures to control administrative costs – appear largely aimed at influencing the upcoming federal and provincial elections, experts say.

Both elections are scheduled for later this year after local polls were held last month.

According to the budget provision, the government has announced that it will reduce the government workforce by 10% in the fiscal year 2022-23. No new job vacancies will be advertised in the civil service and security services, according to the budget.

“Government administrative costs will be reduced by 15%,” he said.

The government also made an announcement not to purchase any new vehicles in the next fiscal year.

Ads aim to reduce costs. But he massively increased the recurrent expenditure budget, compared to the amount allocated for the current financial year.

Not only has the total budget under the recurrent heading increased, but the share of the recurrent budget has also increased relative to the capital expenditure budget and the financial management budget.

According to the budget forecast, the operating budget increased to Rs 753.40 billion from Rs 677.99 billion in the current financial year.

The allocation for recurrent expenditure for the next financial year represents 42% of the total budget against 41.52% for the current financial year.

“The government aims to be pupulist by implementing distributive programs just as it announced austerity measures before the federal and provincial elections,” said Bidyadhar Maillk, former minister and finance secretary.

Even though every government announces austerity measures, past experiences show that they are hardly implemented.

“One wonders if the decision to downsize the government would be wise,” said Suman Sharma, former finance secretary. “Reducing the size of the workforce can also affect service delivery. So downsizing the workforce is the right thing to do rather than downsizing it.

In addition, the government has decided to reduce government staff at a time when it will need more manpower for the next elections.

Former senior government officials are also unsure whether administrative expenses could be reduced as inflation rises and the government would have to bear the cost of inflation in its procurement work.

“The government has decided not to buy new vehicles, but they might have to buy them for the elections,” Mallik said.

Reducing recurring expenses is easier said than done. The government has repeatedly introduced austerity measures, but they are not fully implemented.

The 56th annual report of the Office of the Auditor General contained detailed cases of violations of these measures by government agencies.

The government had introduced austerity guidelines on public spending-2018, which aimed to control unwanted spending in vehicle purchases, fuel consumption and maintenance. But in the financial year 2017-2018, the government spent Rs 6.61 billion on the procurement of vehicles.

According to the annual report, some departments had a disproportionately high number of four-wheeled vehicles compared to the number of officers at officer level.

For example, the number of officers at the Ministry of Interior was 90 but there were 174 four-wheeled vehicles.

In October last year, the government proposed new austerity plans with measures related to cutting spending on vehicle purchases, fuel consumption, meetings, travel and entertainment. other areas, but whether it would be implemented remains to be seen.

The previous KP Sharma Oli-led government last year introduced Austerity Public Expenditure Standards-2020 to reduce government administrative expenditure.

“The problem with such standards is that one government introduces them and the next government ignores them, so they are never implemented,” said Netra Poudel, deputy spokesperson for the Office of the Auditor General. , to the Post in October of last year.

The new budget, however, speaks of various austerity measures.

Through the budget for the next fiscal year, the government has created a long-term liability by increasing the salary of government employees by 15%, reducing the age of eligibility for social security allowance for people aged 68 from the previous 70 years and announcing a “retirement scheme” for farmers under which the government would pay 10% of farmers’ total deposits into the scheme.

These measures contribute to the increase in overall operating expenditure for the next fiscal year. The government’s decision to raise wages and lower the age of eligibility for old age allowance will create a liability of about Rs 76 billion, according to the Ministry of Finance.

The government has allocated 440.43 billion rupees for salaries, pensions and social security for the next financial year, compared to 364.44 billion rupees for the current financial year.

The cost will increase by more than $44 billion in salaries and allowances for government employees and office workers, according to the budget document. The government allocated 188.74 billion rupees for salaries and allowances, compared to 144.48 billion rupees.

The government also announced expenditure for social security at 131.89 billion rupees while the allocation for the current financial year stood at 127.78 billion rupees.

“The government has pushed the recurrent spending envelope by increasing the salary and social security budget,” Sharma said. “The austerity measures announced in the budget alone will not be enough to reduce overall recurrent spending.”

According to Mallik, higher wages mean higher pensions and higher party bonuses.

“Thus, the government assumes more responsibilities. The farmers’ pension scheme will also increase the government’s long-term liability,” he said. “I wonder why the government took such a decision to create long-term liability. Is there a funding guarantee to support these schemes over the long term? »