Voluntary retirement scheme to cut into govt treasury

Published On: December 24, 2017 08:44 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Dec 24: The golden handshake scheme for civil servants is likely to exert further pressure on the government treasury if all those qualified for voluntary retirement opt for it, officials at the Ministry of Finance said. 

According to an estimate, more than Rs 50 billion is needed to pay the interested employees who opt for voluntary retirement. 

The central government has already started drawing plans for employee adjustment. According to the estimate, about 20,000 civil servants may choose to take voluntary retirement before they reach 58. 

Civil Servants Adjustment Act endorsed in October has provisioned for paying minimum of seven years’ pension to employees who have already served 20 years in office and reached 50 years of age. 

The government, already facing shortage of available funds for expenditure, has collected about Rs 109 billion from internal borrowing. The shortage comes mainly due to slow growth in revenue collection and additional expenditure on elections this year, among other reasons. 

The central government will have to immediately release additional Rs 7.14 billion for the provinces as allocated in the budget, and more money for setting up offices of the provincial government and parliaments will be needed. Moreover, it will have to disburse Rs 75 billion to the local levels at the beginning of the last quadrimester, which falls on mid-March. The government has a treasury surplus of Rs 325 billion, of which it can only spend Rs 150 billion. 

“If revenue collection of the second quarter by mid-January does not support the vault, we may see crunch of fund that can be spent. This voluntary retirement scheme may further exert pressure on the government treasury,” said Arjun Prasad Pokhrel, spokesperson of the Ministry of Finance. 

The government has the space left for internal borrowing only Rs 36 billion this fiscal. This year has been the first time for the government to borrow a large volume in the initial months of the fiscal year.

Chief of budget division at the ministry, Kewal P Bhandari, tweeted on Friday projecting that the financial burden may be in the tune of Rs 60 billion if all those civil servants took voluntary retirement. 

“The changes is only civil servants have now to go to work in federal and provincial governments as well as local levels, but rationale of paying golden handshake of seven years salary and also a promotion,” said Bhandari in his tweet, expressing concern about timely and quality bulk recruitment at the local levels and provinces. 

There is no budget allocation for paying for the golden handshake of civil servants.

“Though the demand for such budget may not come at once, the government should take cautious move in managing resources,” said former finance secretary Shant Raj Subedi, who retired in October.

Subedi has also advised to endorse a guideline for cutting recurrent expenditure at the central government in the context of the country having already entered into federal structure and the local levels already becoming active.

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