In its latest economic update for Nepal, the bank said the nation’s PFM systems were well defined on paper but ‘dysfunctional’ in practice. It highlighted ‘critical gaps’ at all stages of budget planning, formulation and execution, as well as deficient oversight capacity and systems.

These problems also hampered Nepal’s intended capital spending in the 2013 fiscal year, the bank said, and there was a need for an in-depth review of its budgeting process.

‘To address structural absorptive bottlenecks, the government of Nepal should carry out an in-depth review of the entire budget chain from planning to budgeting and execution,’ the report stated.

Governance also needed to be improved. The report suggested that Nepal’s internal audit and treasury functions be separated and that the Office of the Auditor General be strengthened and made more independent.

The absence of an elected Parliament since April 2012 meant there had been no legislative scrutiny of government spending. The last assembly was dissolved after it was unable to meet a deadline to draft a new constitution.

‘With the new assembly in place, it is now imperative to restore the functions of the Public Accounts Committee and its ability to address reported irregularities,’ the World Bank said.