Capital spending to bunch towards last few months

KATHMANDU:

Capital expenditure will once again bunch towards the last few months of the fiscal year, raising questions on quality and effectiveness of such spending.

The government earmarked Rs 116.75 billion for capital spending in the current fiscal year which

began on July 17. But it was able to spend only Rs 31.68 billion, or 27.14 per cent of the total capital budget, in the first nine months of the current fiscal year, show the latest statistics of the Financial Comptroller General Office (FCGO).

This means many government agencies will most likely start spending the funds haphazardly

in the coming days because the Ministry of Finance (MoF), during mid-term review of budget, set a target of utilising 85 per cent of the total capital budget by the end of this fiscal.

This begs the question: will such spending yield desired outcomes?“We know capital spending has remained low this fiscal. And we have been pushing various ministries to ramp up spending, but there has been no improvement,” MoF Spokesperson Ramsharan Pudasaini said.

Government’s capital spending has remained considerably low this fiscal because of the failure of five ministries to make timely utilisation of funds allotted to them.

This fiscal, the government allocated capital budget of Rs 85.95 billion, or 73.62 per cent of the total capital budget, to the Ministry of Physical Infrastructure and Transport (MoPIT), the Ministry of Urban Development, the Ministry of Federal Affairs and Local Development, the Ministry of Irrigation, and the Ministry of Health and Population.

But these ministries spent only Rs 21.96 billion, or 25.55 per cent of the allotted funds, in the nine-month period between July 17 and April 13, show FCGO data.

Among the ministries, the biggest chunk of capital budget — Rs 35.31 billion, or 30.24 per cent of the total capital budget — was allocated to MoPIT. But it spent only Rs 10.14 billion in the nine-month period.

“FCGO data should not necessarily mean the ministry has not done any work,” MoPIT Spokesperson Devendra Karki said. “Works are being done, but contractors have not been paid. So, the spending appears to be low. But as payments are settled, expenditure figures will start going up.”

Albeit, Karki acknowledged that the tendency to start construction works in the latter part of the fiscal year has affected capital spending.

“We generally don’t do much work in the first quarter of the fiscal, during which Dashain, (the biggest Hindu festival), falls. Then subsequently many start complaining about cold wave in Tarai, which also delays construction works and hits spending,” Karki said.

“Also, carelessness in budget allocation — such as the practice of earmarking big chunk of funds to projects with less absorptive capacity and paltry sum to projects that are utilising funds well — has affected capital expenditure.”

In such cases, concerned ministries can ask the MoF to transfer funds allocated for one development project to the other. “But most of the project implementing agencies do not make such requests on time, in hope the funds allotted to them would ultimately be utilised, which generally does not happen,” said Karki.

Despite these issues, according to Karki, the MoPIT ‘generally spends around 85 per cent of the budget allocated to it’. “And we hope to meet this target this year as well,” he added.

Capital expenditure, which includes government spending on civil works and purchase of land, building, furniture, vehicles, plants and machinery, among others, has remained very low for the last few years.

Earlier, the reason behind this was said to be political instability.

But since new government came to power following Constituent Assembly election in November 2013, political situation has improved a lot and annual budget was also introduced on time.

Yet, capital spending has not picked up, casting doubts over the country’s ability to close the infrastructure gap, which is needed for sustainable economic growth.

It is said the country needs capital spending between 8.2 per cent and 11.8 per cent of the gross domestic product per year until 2020 to close the infrastructure gap in critical sectors such as energy, transport, water supply, sanitation, irrigation and telecommunications.

Source: THT