Capital spending fails to pick up; Rs 10b spent so far
RUPAK D SHARMA
KATHMANDU, Feb 14: The government´s capital expenditure failed to pick up even till the end of seven months of the current fiscal year to February 11, as only 20 percent of the budget allocated for the purpose was used till the period.
The country´s capital spending hovered at Rs 10.28 billion in the seven-month period, according to data provided by the Financial Comptroller General´s Office. This is one fifth of Rs 51.34 billion allocated for the purpose this fiscal year.
The inability to fully utilize funds allocated for capital expenditure has, on one hand, affected development works, which is likely to hit this year´s economic growth, while on the other put a strain on banking sector´s liquidity, as a large portion of revenue collected by the government is locked up in state coffers.
Although the government´s capital expenditure had stood at around 14 percent of annual allocation of Rs 72 billion in the seven-month period of last fiscal year, it had later picked up. That history is unlikely to repeat this year as the government cannot spend more than what was spent last year because of lack of full budget.
This problem has led to lower allocation of funds for many projects. For instance, the Rural Drinking Water Project, which had sought Rs 9 billion this year, was only extended spending ceiling of Rs 3 billion.
“Because of such problems, many ministries are not interested in implementing projects,” a high-ranking official of the Ministry of Finance told Republica. “On top of this, ministries have been asked to chart out capital spending plans after separating enough funds for salary and other recurrent expenditure.”
Worse, new projects cannot be introduced this fiscal year, which means the government´s spending capacity is further constrained.
“Things are not looking up so far, as only 80 percent of total government-funded projects has sought final approval for implementation,” Gopi Nath Mainali, joint secretary of the National Planning Commission (NPC), told Republica.
As per the rule, all Priority One (P1) projects - which comprise 283 major projects - need NPC´s approval prior to implementation. Once the green signal is extended, concerned ministry then initiates the bidding process, if necessary.
“As per the ongoing practice, projects that have received NPC approval will take at least a month to start the tender process if they are essential. This means implementation process of many projects will commence only in mid-March if things are put on fast track,” Mainali said.
Although a government guideline makes it mandatory for all ministries to obtain project implementation approval from the NPC within 15 days of receiving spending authority from the Ministry of Finance, not all follow the rule. This year, the process was further delayed as spending authority was extended after four months into the fiscal year due to delay in endorsement of the budget ordinance.
As these problems delayed project approval process, the practice of seeking transfers by officials deputed to planning and monitoring divisions of ministries created further problems.
“Many government staff members do not want to remain for long in these divisions as they are not considered plum posts,” Mainali said. “This not only affects project approval process but project implementation and capital spending as well.”