Lack of accountability behind low capital spending

KATHMANDU, Feb 26:

Capital spending remained at mere 12 percent of the total budgetary allocation of Rs 117 billion in the first half of the current fiscal year.

Low spending in the first half means, capital spending will gain pace only in the last trimester of the fiscal year, like in the previous years. Quality of development works will be compromised by such rush of expenditure toward the end of the fiscal year.

Slow spending of taxpayers´ money, despite timely budget and program approval by National Planning Commission (NPC) in a fast track mode, will affect job creation, hit private sector investment and affect overall economic activities in the country.

Development budget of around Rs 25 billion had remained unspent in the last fiscal year due to slow capital spending. The situation is likely to become same this year as well.

Experts say capital spending is not gaining pace mainly due to lack of accountability among government officials and inadequate preparation.

In a recent interview to Republica, Chairman of Development Committee of legislature-parliament Rabindra Adhikari said Melamchi Water Supply Project was unlikely to deliver the result by 2016. “The problem is we have not warned them (project officials) and make them complete the project in time,” Adhikari said, adding that the government´s failure to ensure that the contractor is working as per the work schedule was one of the reasons behind sluggish work progress.

To speed of development projects, the government had announced performance incentive of 0.05 percent of the contract amount based on the number of days the contractor completes work before the deadline. But the scheme has not worked.

“Project officials should be made accountable. We should clear the mindset among government officials that they will receive salary even without doing anything," Chandra Mani Adhikari, member of National Planning Commission, said.

The government is preparing Fiscal Accountability Bill in order to make officials accountable for designated tasks of the project.

Adhikari also stressed for completion of all project development cycle before bringing the program into fiscal announcements so that the implementing agencies will have defined tasks, defined size of the budget and timeframe for project implementation. “Though there are some problems like out-dated laws and land acquisition problems, lack of accountability is the main culprit behind low spending,” added Adhikari.

Unveiling the mid-term review of fiscal policy on Monday, Minister for Finance Ram Sharan Mahat had pointed out lack of proper project preparation and budget planning by the concerned ministries as one of the reasons behind slow capital spending.

Statistics shows more than 60 percent of capital spending is concentrated in the third trimester of the fiscal year, raising question on effective implementation and quality of the project.

Experts say low capital spending will affect economic growth in this fiscal year as well. Former governor Bijay Nath Bhattarai recently told Republica that economic growth has been affected due to very low capital spending of the government as it also failed to encourage private sector investment.

The mid-term review has projected that country´s economy will grow by only 5 percent, down from the targeted 6 percent growth.

Low economic growth will also affecting the country´s target of graduating to the league of developing countries by 2022. The country will be able to meet the target by achieving 8 percent annual growth.

Source: Republica