VZCZCXRO5059
OO RUEHCI
DE RUEHKT #0297/01 0741135
ZNR UUUUU ZZH
O 141135Z MAR 08
FM AMEMBASSY KATHMANDU
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UNCLAS SECTION 01 OF 02 KATHMANDU 000297 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAID ECON PREL NP
SUBJECT: CONGRESSIONALLY-MANDATED REPORT ON FISCAL 
TRANSPARENCY IN COUNTRIES RECEIVING USG ASSISTANCE 
 
REF: 08 STATE 016737 
 
¶1. As requested reftel, post is providing an updated fiscal 
transparency and accountability report. 
 
Nepal's Budget Is Public 
------------------------ 
 
¶2. (U) Nepalese law requires that the Government of Nepal 
(GON) publish its annual budget.  The budget is first 
presented to the Parliament for approval and then distributed 
to all of the concerned authorities, civil society, and other 
interested organizations.  It is then published on the 
Ministry of Finance (MOF) website (www.mof.gov.np).  The 
budget and expenditures are published in three different 
reports, including: the Budget Speech, the Red Book and the 
Blue Book.  The Budget Speech is MOF's statement of estimated 
expenditure for the current fiscal year.  The Red Book 
provides Ministry level information on the past year's actual 
expenditure and provides the planned budget allocations for 
the coming fiscal year for the Ministries, Districts and GON 
programs.  The Blue Book provides donors' planned commitments 
for programs and projects for the coming fiscal year.  Budget 
allocations for each District are monitored by the District 
Treasury Controller's Office (DTCO).  Internal audits are 
conducted for all government and development office 
expenditures.  In general, capital expenditures are 
controlled by the Local Development office.  At the end of 
the fiscal year, all GON expenditures are audited by the 
Office of the Auditor General (OAG). 
 
Budget Process Is Participatory and Inclusive 
--------------------------------------------- 
 
¶3. (U) Prior to the preparation of the annual budget, the 
MOF's Revenue Advisory Committee (RAC) is given the 
opportunity to provide recommendations on policies, 
priorities and programs to be included in the budget.  The 
RAC is made up of representatives from the business 
community, professionals, civil society, media persons and 
other stakeholders. 
 
Law and Regulations 
------------------- 
 
¶4. (U) There are a number of laws and regulations governing 
the public disclosure of revenues and expenditures in the 
national budget.  Past constitutions, as well as the 
prevailing Interim Constitution require the GON make its 
budget public. Part 9 of the Interim Constitution requires 
the GON's budget be presented to and passed by the 
Parliament.  The "Financial Procedure Act, 2055 (1998) 
provides the procedure for the preparation of the GON's 
annual budget.  The Local Self-Governance Act, 2055 (1998), 
the Corruption Control Act, 2059 (1999) and their regulations 
also help govern the budget preparation procedure and make 
concerned authorities more responsible and accountable.  The 
GON has taken important steps to ensure transparent and 
accountable budget management and there are a number of 
governance reform projects underway to improve the GON's 
planning and budgeting process for medium-term expenditures, 
the GON's financial management information system and the 
GON's system for procurement.  This project includes the 
drafting, enactment and implementation of the new Procurement 
Act (2007).  The recently enacted Right to Information Act, 
2064 (2007) will make the government's expenditures, budget 
preparation and implementation activities even more 
transparent as it mandates citizen access to almost all 
government activities and information. 
 
Public Budget Inclusive 
----------------------- 
 
¶5. (U) The legal provisions requiring certain procedures in 
the preparation of the GON's annual budget, as well the 
requirement that Parliament approve the budget, ensure that 
all revenues and expenses are included in the budget 
 
KATHMANDU 00000297  002 OF 002 
 
 
documents publicly available.  The facts and figures included 
in the budget are generally accurate and meaningful, except 
for the incomplete tracking of donor funds.  However, there 
is less transparency in the reporting of the revenues and 
expenditures of some of the state-owned enterprises, such as 
Nepal Airlines Corporation, the Nepal Electric Authority and 
Nepal Oil Corporation etc... 
 
Donor Assistance 
---------------- 
 
¶6. (U) The World Bank, International Monetary Fund (IMF), 
Asian Development Bank and the Department for International 
Development of the United Kingdom (DFID) have provided 
continuous support to the GON for financial sector reform, 
with the IMF providing specific technical assistance to 
ensure transparency in the GON's budget management process. 
Other international agencies supporting the endeavor are 
Danish International Development Assistance (DANIDA), the 
Norwegian Embassy and the United Nations Development Program 
(UNDP).  A "Country Financial Accountability Assessment 
(CFAA) was first conducted in 2002 and was updated in 2005. 
These assessments are intended to provide public financial 
management benchmarks and improve overall governance. 
POWELL