Instability in the finance secretary role impacting the country’s economic sector

With Krishna Hari Pushkar’s appointment on September 15, the Ministry of Finance has seen five different finance secretaries in the past 18 months, with three being replaced since Prakash Sharan Mahat assumed office as the finance minister.

During economic crises, the Ministry of Finance plays a crucial role in managing and stabilising the country’s economy. However, akin to a game of musical chairs, government employees tasked with the responsibility of maintaining economic balance are often shifted or replaced.

Arjun Prasad Pokharel served as the finance secretary before Pushkar assumed the position. Prior to Pokharel’s appointment on May 3, Toyam Raya held the role for approximately four months. Pushkar initially held the position of finance secretary before Raya was appointed to the role.

Furthermore, when the then Finance Minister Janardan Sharma presented the budget for the fiscal year 2022/23, Madhu Marasini, who held the position of finance secretary, was reassigned due to his involvement in a controversy surrounding the alteration of tax rates in the budget, attributed to the entry of unauthorised individuals. Subsequently, Pushkar, who assumed office on August 11, 2022, was succeeded by Raya on January 5.

Flawed approach

Ministry of Finance
File image: Ministry of Finance

This is not an anomaly, as similar incidents have been occurring regularly over the past decade.

“The secretary is an important figure. I don’t think they should be transferred this often. They should remain in office for at least two years,” said former Chief Secretary Bimal Koirala. “Following that, an evaluation can be done to decide if their term should be extended.”

Things were different in the past, says Koirala. He mentions that individuals appointed as finance secretaries would typically retire from government service while holding that position.

“The stability of the finance secretary was a beautiful aspect of the Ministry of Finance,” says Koirala who has served as the finance secretary himself. “I think we need to give some stability to the post.”

The Ministry of Finance is widely regarded as the most pivotal ministry in the country. Responsible for overseeing all government income and expenditures, it also guides the operations and services of other ministries and agencies. Former administrators underscore the critical importance of a robust Ministry of Finance, as the effectiveness and efficiency of other ministries hinge on its resilience.

Other ministries also look to the Ministry of Finance with anticipation, recognising it as the guardian of the country’s treasury. This is why all secretaries within the Nepal government hold the same rank, yet there exists a tradition of affording special respect to the finance secretary.

It is commonplace for secretaries from various ministries and agencies to turn to the finance secretary to resolve procedural complexities. By this, it is clear that the finance secretary holds a position of utmost significance among secretaries and is second only to the chief secretary, owing to the perception that they possess exceptional abilities and a high level of professional insight.

Except for Narkanta Adhikari, who was transferred after a tenure of about six months during the Panchayat period, all the finance secretaries had completed their tenure. Even after the establishment of multi-party democracy, the post of finance secretary was considered relatively stable for a long time. Civil service experts say that after the resignation of Rameshore Khanal, the post of finance secretary has become unstable.

Finance secretaries like Rameshwar Khanal, Bidyadhar Mallik, Bimal Koirala, Ramsharan Bhattarai, Thakur Nath Pant, and others are still held in high regard as symbols of prestige within the Ministry of Finance.

“Now the principle of requiring honesty seems to have been abandoned. We’re in a situation where finance secretaries are appointed based on word of mouth,” says a former secretary.

Minister’s preference

finance secretary
Finance secretaries are selected based on the preferences of finance ministers.

Rameshore Khanal resigned due to differences with then-finance minister Bharat Mohan Adhikari. After that, the process of appointing financial secretaries started to be guided by the minister’s discretion.

“This situation has come about because the political leadership is afraid that a professional individual might take an independent stance and not simply follow orders that would potentially disrupt the legal proceedings,” says former secretary Gopinath Mainali.

Former secretaries also believe that one of the reasons for economic issues in Nepal stems from not appointing the right person as the finance secretary. They argue that during economic turmoil, hasty decisions can lead to adverse outcomes.

“If Pushkar does not leave the Ministry of Finance in around four months, the economy will deteriorate further which will lead to Mahat’s having to resign,” says a former secretary.

Given that ministerial positions are political appointments, there is no assurance that an individual with a deep understanding of the economy will assume the role of finance minister. That is where the finance secretary comes in.

“Capacity, professionalism and stability are very important characteristics that a finance secretary needs to have,” says Rameshore Khanal. “The practice of randomly changing finance secretaries is not only uncommon in developed countries but also in most SAARC nations. Therefore, it should not be a prevailing practice in our country either.”

Former administrators suggest that the economy would not have suffered significantly if a proactive finance secretary had served for the entire term. They believe that if the finance secretary had taken timely action to withdraw the financial concessions granted to the private sector in the aftermath of the Covid pandemic, the economy would not be facing the same challenges it is today.

“Decisions taken by the Board of Directors of the Nepal Rastra Bank, which is represented by the finance secretary, have also become a factor in the economy’s problems”, says a former secretary. “The act of inciting the finance minister against the governor, coupled with the unbalanced role of the finance secretary who lacks the authority to address the NRB’s board, has contributed to the current situation.”

Lack of financial knowledge

revenue collection public debt loan financial aid
Revenue collection

Anyone who has qualifications in any area and is efficient can be in the civil service. However, to be the financial secretary one should have knowledge of economics and should have worked in agencies under the Ministry of Finance. Nevertheless, this practice is no longer followed, which has an adverse effect on Nepal’s economy.

The finance secretary serves as Nepal’s representative during interactions with donor agencies. This is why many experts believe they need to be a person of sound judgment, capable of articulating the country’s economic standing and potential on the global stage. Former secretaries recall that in earlier times, the private sector used to approach the finance secretary with a degree of circumspection.

The present situation is different. The finance minister no longer prioritises the selection of competent, efficient, and honest employees. They now lean towards a secretary who is compliant and flexible, straying from the traditional criteria for selecting an effective finance secretary within the Ministry of Finance.

For example, Suman Sharma, an engineer with expertise in drinking water, was given the opportunity to serve as the finance secretary. Former Chief Secretary Lokdarshan Regmi, who also held the position of finance secretary, along with Arjun Pokharel, who was recently reassigned, do not have a background in finance. There are numerous instances of such secretaries over the course of a decade.

On the contrary, Dr Baikuntha Aryal, the current chief secretary who was viewed as a qualified and skilled candidate for the position of finance secretary, was not appointed to the position. Likewise, Kewal Prasad Bhandari, who is about to retire has been sent to the Ministry of Labour.

The Ministry of Finance is where regular citizens, party leaders and activists, lawmakers, and businesspeople seek budgets and plans. Nowadays, businesspeople are taking their policy concerns from the Ministry of Finance directly to the Prime Minister.

“In the past, industrialists used to raise their demands and issues with the finance secretary, now they are approaching the prime minister even with small issues,” says a former secretary.

Khanal says that in other countries, it is not customary to reassign a person once they have been appointed as the finance secretary unless there are significant allegations of corruption involved.

“All development and good governance policies revolve around the periphery of the economic policy. If the economic policy administrator becomes unstable, other policies will be affected”, says Khanal. “That’s why many countries have given importance to the stability of the finance secretary.”

He emphasises that if the role of the finance secretary is rendered weak and unstable, it will not only lower the morale of the private sector but also disrupt relationships with key development stakeholders.

This story was translated from the original Nepali version and edited for clarity and length.

React to this post

Ghimire is a senior business journalist at Onlinekhabar.

More From the Author


New Old Popular