Reallocation of budget gathers momentum

KATHMANDU:

The National Planning Commission (NPC) has started coming under pressure to transfer funds allocated for one development project to the other, as various government bodies struggle to make use of capital budget allotted for this fiscal year.

In total, around Rs three billion allocated for various physical infrastructure projects may be funnelled to other projects, so that those that need funds do not face financial problems, NPC Joint Secretary Gopi Nath Mainali told The Himalayan Times.

One such project, whose fund is being transferred, is Bheri Babai Diversion Multipurpose Project, a hydropower cum irrigation project, which was allotted a fund of Rs 1.01 billion for this fiscal. The project was able to spend only 2.05 per cent of the budget till the end of the first eight months of the current fiscal.

“We will be diverting Rs 500 million meant for the project to other small-scale irrigation projects after taking consent of the Ministry of Finance,” Mainali said.

Likewise, funds of around Rs 290 million allocated for construction of buildings under the Ministry of Urban Development are being transferred to various drinking water projects, while the budget earmarked for expansion of various road networks is being extended to bridge construction projects.

“While channelling funds from one project to another, we will make sure such transfers are made among similar types of projects — meaning funds allocated for an irrigation project would not go towards an entirely different project like construction of school buildings,” Mainali said. “Also, funds allocated for projects that are given higher priority — like those labelled Priority One — will not be channelled towards projects of relatively lower importance.”

It is a general practice in the country to reallocate budget towards the end of fiscal year.

“One of the major reasons behind this is the inability of various projects to make proper use of funds due to lack of effective planning, delay in project start-up, lingering tender and procurement processes, and lack of proper monitoring,” Mainali said. “At the same time, funds are also left over because of mismatch in cost estimated by the government and actual price quoted by contractors.”

Because of these problems, the government always fails to make maximum utilisation of capital budget, which includes money allocated for various physical infrastructure development projects with ability to create hundreds of thousands of jobs and business opportunities for private sector players like contractors.

The government had allocated Rs 85.10 billion for capital spending this fiscal, of which only Rs 30.74 billion, or 36.13 per cent, was spent

till Sunday. Considering this trend, the government may face problems in utilising 84.30 per cent of this fiscal’s capital budget as projected

by the mid-term budget review meeting.

However, the government is upbeat on meeting the target as most of the capital budget is used in the second half of the fiscal.

In the first half of last fiscal, for instance, the government’s capital expenditure stood at Rs 7.66 billion. However, in the second half, the spending surged by over six times to Rs 46.86 billion.

Earlier, the World Bank had said that the answer to under-investment lies in public financial management systems that are well defined on paper but dysfunctional in practice, with critical gaps at all stages of budget planning, formulation and execution as well as deficient oversight capacity and systems.

Fund transfer

• Rs 3bn allocated for physical infrastructure projects to be funnelled to other projects

• Rs 290m allocated for construction of buildings to be transferred to drinking water projects

• Budget earmarked for expansion of road networks to be extended to bridge construction projects

• Transfers to be made among similar types of projects

Causes for underutilisation

• Lack of effective planning

• Delay in project start-up

• Lingering tender and procurement processes

• Lack of proper monitoring

• Mismatch in cost estimated by the govt and actual price quoted by contractors

Source: THT