The government’s resource committee has capped next fiscal year’s public expenditure at Rs1,206 billion—up 15 percent than the budget of this fiscal year.

A meeting of the resource committee, which is chaired by the vice chairman of the National Planning Commission (NPC), took this decision on Monday, a reliable source said.

However, allocations made for different types of expenditure, such as recurrent, capital and financing provision, could not be confirmed till the press time. Also, funds allotted for different ministries could not be confirmed.

The resource committee, which also comprises finance secretary and governor of Nepal Rastra Bank as members, generally fixes budget ceiling for the upcoming fiscal year right after the end of the first half (mid-January) of the ongoing fiscal year.

Based on this ceiling, different ministries prepare projects and programmes for the upcoming fiscal year. These proposals prepared by the ministries are then reviewed by the NPC and the Ministry of Finance (MoF), before they are rejected, or incorporated in the annual budget of the next fiscal year.

As per the practice, the MoF should also refer to the budget ceiling prepared by the resource committee while framing the annual public spending plan for the upcoming fiscal year. But that generally does not happen.

In the last fiscal year, for instance, the NPC had initially extended a budget ceiling of Rs 908 billion, calling on ministries to embrace frugality and focus on cost effectiveness while formulating programmes.

But by the time the budget was presented at Parliament the figure had swollen to Rs 1,048.92 billion-up 28 percent than in fiscal year 2015-16.

The government generally expands the size of the budget in an unnecessary manner, but fails to make use of the allotted funds on time.

So far this fiscal year, the government has only been able to spend only 29 percent of the budget. Worse, capital spending, which is crucial to narrow down the country’s infrastructure gap, currently stands at 15 percent of the total allocation of Rs312 billion.

As a result of slow spending in the initial months, capital expenditure generally tends to bunch towards the last quarter of the financial year.

In the last fiscal year, for instance, about 70 percent of the budget allocated for capital expenditure was used in the last three months of the financial year and 49.4 percent was spent in the last month of the year. The trend was the same a year ago when about 63 percent of the capital budget was utilised in the final quarter and 44 percent in the last month.

This is the result of weak planning, and delay in preparation of detailed project design, land acquisition, establishment of project management offices and preparation of procurement plans. Haphazard spending towards the end of the fiscal year raises chances of development of sub-standard projects, which tends to push up maintenance costs and thereby recurrent expenditure.