By Our Business Reporter
Nepal’s public finances are leaking in slow motion, and everyone can see it, yet nobody seems able to tighten the valve. The latest report from the Office of the Auditor General puts the country’s arrears at Rs 755 billion, with Rs 88.09 billion added in a single year. It is indeed a reflection of how the state manages money it already does not have.
The structure of the problem is brutally simple. Government offices spend, delay settlement, bypass procurement discipline, and push liabilities into the future. Year after year, the same pattern repeats, only the figures get larger. Federal agencies alone account for Rs 53.49 billion of the latest arrears, while provincial and local bodies add their own share. Even recovery efforts of Rs 14.63 billion barely scratch the surface. The system is not slowing down. It is accumulating failure.
The concentration of arrears in key ministries exposes where the real pressure points lie. The Ministry of Finance alone carries more than 70 percent of the total burden, followed by infrastructure-heavy ministries such as roads, land management, forests, and communications. These are not marginal departments. They sit at the core of Nepal’s development machinery. When arrears pile up here, it signals that the problem is not isolated mismanagement. It is systemic dysfunction.
At the center of it all sits a familiar trio: weak discipline, weak capacity, and strong political interference.
Weak fiscal discipline shows up in Nepal’s familiar “Asare spending,” where agencies rush year-end spending, inflate bills, and treat paperwork like a nuisance. That chaos creates arrears. The problem worsens as many local governments still lack trained accountants and reliable reporting systems. Add political pressure to push unprepared projects, and financial management slips from weak to nearly theatrical.
Then comes the most decisive factor: political interference. Projects are not always selected because they are needed. They are selected because they are visible, influential, or politically useful. Once that logic takes over, accountability weakens. Contractors gain leverage, oversight becomes selective, and enforcement softens. When politically connected actors are involved, irregularities rarely face consequences. That is where arrears quietly take root.
The cost of this accumulation is not just fiscal. It directly distorts development outcomes. Locked public money reduces fiscal space, limiting the state’s ability to invest in new infrastructure. Delayed payments slow down ongoing projects, while disputes over bills and procurement freeze implementation altogether. Investors take note of these patterns. They do not just read budget speeches. They read audit reports. A state that cannot settle its own accounts rarely inspires confidence in long-term contracts.
The real culprits are the ones sit inside the system: spending units that bypass rules, administrative leadership that tolerates delays, political actors who protect irregularities, and oversight bodies that treat audit findings as routine paperwork rather than corrective tools. Accountability does not disappear. It gets diluted across layers until no one feels directly responsible.
This is where the new political leadership faces a test that cannot be handled with slogans. Under the government led by Prime Minister Balendra Shah, the expectation of clean governance is high. But arrears are not reduced through intent alone. They require structural enforcement.
Financial reporting must shift to real time through a fully digitized, unified accounting system across federal, provincial, and local levels to cut delays and manipulation. Instant transaction recording would narrow room for post-facto adjustments. Accountability also needs teeth, with sanctions for offices repeatedly failing to settle advances or submit accounts, especially in high-spending ministries, backed by targeted audits and legal action instead of routine reviews.
Procurement discipline should tighten through stricter quarterly spending limits to prevent year-end rushes. Parliamentary oversight must move beyond ceremonial reviews, with active hearings and compliance tracking by Public Accounts Committees. Political interference in financial decisions must also be reduced to stop arrears from recurring despite technical reforms.
Unless enforcement replaces formality, arrears will continue to rise, audit reports will continue to thicken, and public finance will remain stuck in a loop of spending without settling. A government that cannot track and clear its own obligations will always struggle to project credibility in managing anything larger than its paperwork.
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