How to Spend?

Delayed spending affects the progress of current year's budget implementation as governmental agencies are bogged down by executing previous year's projects, says Liu Guoyan, fellow researcher with the National Development and Reform Commission's Macro-economy Institute.

However, Liu cautions that a sudden surge in spending to meet the deadline could lead to a wanton waste of funds.

Indeed, the stern warning from the Ministry of Finance has caused knee-jerk reactions among various governmental agencies. In the rush to spend, some agencies have started procuring materials in advance, despite being out of line with other project progress.

A source from the Ministry of Agriculture laments that it is a difficult balancing act to spend speedily yet effectively.

Economist Ma Caichen says irrational spending aimed solely at balancing the account could back-fire. He says that surplus funds resulted from unrealistic projections should be left untouched to avoid waste, and adds that a responsible government should justify its spending to tax payers.

The Ministry of Finance is stepping up efforts to improve budget planning. The drafting of 2008 budget has started nine months ahead of schedule; previously, the planning took only four months.

The move allows more time for various agencies to study budget applications carefully prior to submission.

Delay in implementation is also linked to the budget approval procedure. Grass roots agencies usually receive funding in April, as their applications need multi-level approvals from the National People's Congress (NPC) and Chinese People's Political Consultative Conference (CPPCC).

As a result, first quarter of the year passed without any expenditure being implemented.

To solve the problem, Ministry of Finance has requested a greenlight from the NPC to release the first quarter's budget in advance. The advance funding would be based on previous year's actual spending during the corresponding period. The proposal is still under deliberation.

The ministry will also scrutinize each budget application more closely in the future, and poorly prepared submission will be sent back for revision.

Eight years have passed since budget reforms were first launched.