Failing to spend, govt has Rs 73b in its treasury

KATHMANDU, NOV 22 -

A failure to spend the capital budget has resulted in a cash reserve of Rs 73 billion with the government’s treasury as of Friday.

It is probably the highest-ever amount the treasury has held so far, according to the Finance Ministry.

Despite the announcement of pro-reform policies in the budget and relatively favourable political situation, the government has been performing poorly when it comes to capital budget spending.

Finance Ministry Spokesperson Krishna Devkota said some ministries failed to spend well.

Capital expenditure as of November 20 stood at just 5.65 percent (Rs 6.59 billion) of total capital budget, according the Financial Comptroller General Office (FCGO). The overall expenditure, however, reached 15.99 percent.

According to Devkota, total expenditure in the first four months of the fiscal year rose 27 percent year-on-year.

A review meeting between secretaries of six ministries and officials from the National Planning Commission (NPC) concluded only 10 of the 21 national pride projects are performing well. Progress of five out of six road projects, three irrigation projects and two hydropower projects have been termed satisfactory. Among other projects whose performance was found satisfactory are Mid-Hill Highway, Kathmandu -Tarai Fast Track, all three North South Roads, Sikta, Rani-Jamara-Kulariya and Babai  Irrigation Projects.  Among hydropower projects, 456MW Upper Tamakoshi and 600MW Budhi Gandaki are performing well.

The government has allocated Rs 25.08 billion (largely capital budget) for these projects, and a good spending will be reflected in the overall expenditure.

An NRB official said the government’s failure to spend has also affected bank lending. When the government spends, contractors take loans from banks and financial institutions (BFIs) for equipment and construction materials.

Although BFIs’ lending in the first quarter seemed modest, central bank officials say more lending is required to address the excess liquidity situation in the banking system.

In the first quarter, BFIs’ loans and advances rose 5.1 percent (Rs 67.15 billion) compared to 2.7 percent (Rs 31.11 billion) in the same period a year ago. According to the Nepal Rastra Bank, the banking sector has held excess liquidity of Rs 35 billion this week. The central bank has been mopping up the surplus liquidity through monetary instruments like reverse repo and deposit collection.

Source: The Kathmandu Post