Slow capital expenditure raises concerns over development projects in Nepal

KATHMANDU: In the initial seven months of the current fiscal year, the Nepalese government has spent only 21.05 percent of the allocated funds for development works, according to records from the Financial Comptroller General Office.

Out of the earmarked Rs 302 billion for capital expenditure, only Rs 63.57 billion has been utilized, signaling a worrying trend compared to the previous fiscal year when 17.43 percent was expended during the same period.

Former Finance Secretary Krishnahari Baskota attributes the sluggish capital expenditure to ill-preparedness in implementing infrastructure projects, delays in the tender process, bureaucratic hurdles, and issues related to projects funded by donor agencies.

This trend of slow spending on capital expenditure is an annual occurrence, with expenditures often accelerating only towards the end of the fiscal year.

Analysts express concerns over the negative impact on the quality of development works, employment opportunities, and the overall cash flow in the market.

With the country already grappling with economic slowdown, the government’s inability to expedite spending on development projects exacerbates the challenges faced by the economy.

Addressing the mid-term budget review on Monday, Finance Minister Prakash Sharan Mahat acknowledged policy and legal hurdles affecting development projects and causing delays in capital expenditure.

Mahat, however, assured that the government has reviewed these obstacles and anticipates an acceleration in development projects in the coming days.

In contrast, the government has been more successful in recurrent expenditure, having spent Rs 509 billion in the first seven months, which accounts for 44.58 percent of the initially allocated budget of Rs 1.141 trillion. Facing challenges in revenue collection and low expenditure capacity, the government downsized the fiscal year budget by 12.62 percent to Rs 1.530 trillion.

The revised estimation includes a plan to spend 88.84 percent of the actual regular expenditure, 84.13 percent of the allocated Rs 302.07 billion for capital expenditure, and 87.39 percent of the allocated Rs 307.45 billion under financial management.

Despite the downward adjustment in the budget, revenue collection stands at only 39.89 percent of the targeted amount for the fiscal year, with a fiscal deficit recorded at Rs 95.19 billion.

The government faces the challenge of balancing its expenditure and revenue collection to ensure effective economic management in the coming months.