Bad bookkeeping, by Navin Khadka

In absence of an atmosphere for a global climate agreement in the near future, one of the issues dominating the upcoming United Nations-led conference in Durban will be finance. Particularly, when the developing world has accused developed countries of not fully living up to their funding commitments and of double-counting their regular aid as climate finance.

But what if a recipient country itself doesn’t know how much of its national budget is being spent under the “climate” overhead?

That is the question Nepal is faced with even as more and more climate adaptation funds make inroads.

The Finance Ministry does not have a ready-made record that shows how much money comes in and goes out for climate change projects.

An investigation I just did for the BBC Nepali service shows that the ministry’s bookkeeping is yet to recognise climate as one of the several headings it allocates the national budget under.

“The existing software we use in our budgeting system does not have climate as a separate overhead,” said Bodh Raj Niraula, the immediate past chief of the programme and budget division of the ministry before he was transferred recently. “The money we receive for climate change projects come under the headings of several cross-cutting sectors which makes it all the more difficult to calculate the amount received for that purpose only.”

He said the ministry did not have the technical knowhow to develop the software tool as of now.

His successor at the budget and program division, Lok Darshan Regmi agreed that no separate head was allocated for climate change but he added that the money for the same was being channelized through different ministries.

“You will not be able to see climate budget separately like the way you get to see, for instance, repair and maintenance. But we can sieve through the different headings and calculate the amount.”

Now that will certainly be a tough nut to crack if at all the finance ministry does it.

Had it been a piece of cake, it would have by now simply added one more column for climate in the spreadsheet and mentioned the figure—job done.

The environment ministry does have a table of climate financing: It has 14 climate project names, both ongoing and in the pipeline, totalling around 260 million US Dollars, most of it foreign aid.

But that is broadly what has been agreed with different donors in papers. When the money comes in, it must enter through the finance ministry as that is the only official agency entitled to handle the treasury. And then only funds are funnelled down to different ministries.

In case of climate change projects, finance ministry officials say, several ministries like environment, forest, local development, among others, are involved.

That again would not have been a problem if only these ministries got their budget clearly marked as climate finance.

“That is something we need to improve and it will happen gradually,” said Regmi. “But the absence of climate as a separate overhead does not mean the government is not committed to fighting climate change.”

Commitment on climate financing is something donor countries have made all along.

After the collapse of the much-hyped Copenhagen conference in 2009, they had pledged 30 billion US Dollars fast start finance for three years until 2012.

There is wide criticism that very little money of that commitment has actually been delivered and the many donors have double counted their regular aid as climate finance.

This was raised with the US chief climate negotiator Jonathan Pershing last year in Bonn. When asked how much had the US given for the fast start finance, this is what he had to say: “It’s not possible to spell out the exact figure because our aid goes to many areas that are linked to climate in many ways.”

In that case, recipient countries like Nepal are double-troubled; its donor would not specify what is coming in as climate aid and the finance ministry does not have the mechanism to specify that either.

Experts, however, say many developing countries share similar problems and that they are working to overcome it.

“A recent UN meeting on Classification of Functions of Government (COFOG) did identify this problem and it was agreed that climate change will have to be given a separate code (so that climate will be a separate heading in budget allocations),” said former finance secretary and now the prime minister’s financial advisor Rameswor Khanal.

In the list of existing codes of the COFOG registered with the UN Statistics Division, 05 stands for environmental protection but none of the six sub-headings under it are climate change.

Unless that fundamental flaw is corrected, the climate financing picture in the finance ministry’s records will remain blurred—regardless of the one after another environment ministry projects supported by some donors for what they call streamlining climate funding.

Navin Singh Khadka is a BBC journalist based in London.

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