Govt accelerates contractor payments, boosting construction and economic indicators

KATHMANDU: In a significant development, the Nepalese government has demonstrated a noteworthy acceleration in settling payments to contractors over the last two months, addressing concerns raised by contractors about delayed payments.

According to records from the Financial Comptroller General Office (FCGO), the government disbursed a total of Rs 27.08 billion in the past two months to settle outstanding payments to contractors.

This surge in payment is reflected in the capital expenditure, which rose from Rs 49.23 billion by mid-January to Rs 76.31 billion as of Monday. A substantial portion of the capital expenditure has been utilized to clear dues owed to contractors.

Rabi Singh, President of the Federation of Contractors’ Associations of Nepal (FCAN), acknowledged the government’s recent efforts in expediting payment settlements, emphasizing its positive impact on the pace of construction projects across the country. The move is seen as a welcome development, addressing the concerns of contractors and facilitating progress in the construction sector.

The increased capital expenditure has not only eased the financial strain on contractors but has also influenced government revenue collection.

In the first seven months of the current fiscal year, total revenue collection witnessed a 10.2 percent increase, reaching Rs 567.40 billion, as per government records. A notable Rs 13.50 billion was collected under the value-added tax for consultant and contract services during this period.

The positive momentum in payment settlements by the government has cascaded to various sectors, with manufacturers and suppliers of construction materials reporting a surge in demand for cement and iron rods. Over the past two months, demand for these construction materials increased by an average of 25 percent.

Dhruba Thapa, President of the Cement Manufacturers’ Association, Nepal, highlighted that cement manufacturers have significantly ramped up production, utilizing approximately 60 percent of their production capacity. This marks a considerable improvement from the 35-40 percent utilization reported a few months ago.

The impact of the government’s payment settlement is further evident in the real estate sector. Records from the Department of Land Management and Archive reveal that a total of 49,290 units of land plots and houses were transacted in the one-month period spanning mid-January to mid-February. This surge in transactions resulted in the government collecting tax revenue amounting to Rs 3.71 billion.

The proactive approach of the government in addressing contractor payments not only addresses industry concerns but also stimulates economic activities, boosting construction projects, revenue collection, and demand in related sectors.

The collaborative efforts between the public and private sectors are crucial for sustaining this positive momentum and fostering economic growth in Nepal.