Government Budget, Types of budget and process of budget formulation in Nepal Government Budget, Types of budget and process of budget formulation in Nepal

Government Budget, Types of budget and process of budget formulation in Nepal

government-budget

Government Budget

The government budget is defined as the statement of a financial plan for a given period related to the income and expenditure of the government. The word 'Budget' has been derived from the French word 'Bougette' which refers to a small leather bag or a wallet. 

In the 18th century, while Walpole was the 'Chancellor of Exchequer' of England, he used to carry a leather bag to the 'House of Commons' keeping the financial proposals inside the bag. So, the leather bag itself was called the financial proposal of the government. In this way, the meaning of the English word 'budget' is not a leather bag but a financial proposal kept inside the bag.

According to Bastable, "The budget has come to mean the financial arrangements for a given period with the usual implication that has been submitted to the legislature for approval."

According to the World Bank, "The annual budget is usually the legal authority for public spending."

Thus, the government budget is the statement of expected revenue and proposed expenditure of the government for the coming fiscal year.

Contents of budget

A complete budget generally includes the following components:
  1. Summary of the economic progress of the previous fiscal year
  2. Objectives of the budget
  3. Estimation of the government expenditure
  4. Revenue proposals (Sources of government revenue), and
  5. Sources of deficit financing

Types of budget

There are many types of government budgets. Among them, some of the important ones are as follows:

1. Deficit budget: The government budget in which the total revenue is less than the total expenditure is called deficit budget.

2. Surplus budget: The government budget in which the total revenue is more than the total expenditure is called a surplus budget.

3. Balanced budget: The government budget in which the total revenue is equal to the total expenditure is called a balanced budget.

Process/Steps of Budget Formulation in Nepal

The budget formulation is the act of forecasting the income and the expenditure of the government for the coming fiscal year. The finance ministry formulates the budget. It started a few months before the coming fiscal year. The common process of budget formulation is given below:

1. Estimation of overall expenditure and income: In the first stage, the planning authority should decide on the primary targets of the expenditure and the possible income or revenue of the government. On the basis of the primary targets, the overall expenditure is decided. The national development council including all the representatives of the government agencies makes the final decision of the budget limit.

2. Priority establishment: In the second stage, the planning authority gives the weightage to the different sectors and decides the priority of their development. On the basis of this priority, it gives direction to all the departments to prepare and submit their proposals remaining within the limit of the budget.

3. Project preparation: The concerning departments prepare their projects and submit the proposals to the planning authority.

4. Selection of projects and submission: The planning authority reviews and selects the projects submitted by the concerning departments and informs them about the selection. Moreover, it reviews the financial cost of these projects and tries to adjust to the budget limit. The selected projects are submitted to the budget office.

5. Preparation of final budget: The budget office gives the final shape of the budget after making a thorough review on the basis of different principles and conditions. The final shape of the budget is approved by the cabinet and is presented to the legislature for discussion.

6. Authorization and execution: In the final stage, the budget is discussed in the legislature. After a long discussion on each and every item of the budget, it is passed and forwarded for the approval of the head of the state. When it is approved, it is authorized and the finance ministry begins to execute. 

The budget is disbursed to the concerned departments on four monthly bases remaining within the limit of the budget allocation. The disbursement of the fund depends upon the nature and the performance of projects. Lastly, the auditor general controls the budget through the function of audit. 

Thus, it ensures the authorities that the expenditure has been made according to the law and rules of the country.

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