Low Capital Spending

It is sad to note that the capital budget spending in Nepal is not going to meet even the lowered target of 85 per cent in the current fiscal year. The capital spending was not so encouraging even in the past fiscal years. As per a news report published in this daily, only 70 per cent of the capital budget will be utilised in the fiscal year 2018/19. This indicates that the budget has failed to have desired impact on development activities. During the mid-term review of the budget, Finance Minister Dr. Yuba Raj Khatiwada had revised the budget and lowered the target to 85 per cent of the total capital expenditure of Rs. 313.99 billion. The new target is another 15 per cent down from the revised estimates of the budget. According to the revised estimates, the utilisation of capital budget should be Rs. 265.26 billion by July 16, the last day of the fiscal year. The Financial Comptroller General Office (FCGO)’s daily budgetary status report showed that the government had utilised 53 per cent of the total capital budget until two weeks back. The FCGO’s figure indicated that the daily expenditure stood at about Rs. 1.25 billion in that period. The government had to spend about Rs. 15.12 billion a day to meet its revised target for the capital budget.

The delay in appointing contractors, extending spending authority to project implementing agencies and acquiring land is regarded as major factors leading to the low capital spending. The deferral of settling disputes concerning cost variations, issuing permits to fell trees in forest areas and supplying construction materials is equally responsible for the poor utilisation of the development budget. Formulating laws in line with the constitution, issues related to transfer of projects to the State and local governments and delay in adjusting civil servants also hit the capital spending. It is needless to say that the failure to spend the capital budget may be detrimental to the growth prospect of the economy. The capital expenditure is undoubtedly the growth driver of any economy.

Being a low-income country, Nepal requires a rapid increase in capital budget spending. The process of development activities such as constructing roads, bridges, airports, hydropower projects and irrigation projects cannot gain due momentum unless and until the capital spending is increased rapidly. When there is no optimum utilisation of the capital budget, people will not have access to different public facilities and services. For the enhancement of the capital budget utilisation, the authorities concerned must ensure that the projects are planned properly. The projects should also be implemented in an efficient manner. Learning from the past, the Ministry of Finance and other relevant agencies must devise more effective plans to boost the country’s fund absorptive capacity. There has been a bad practice of spending the capital budget haphazardly at the end of every fiscal year. Most of the public agencies are found carrying out the development activities in their respective areas from mid-June to mid-July just to meet their target of spending the capital budget. This type of eleventh-hour spending may help them to meet the target in the document but it does not ensure quality work. This also raises chances of the taxpayers’ money being embezzled. 

 

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