Finance Ministry has made it mandatory for government projects to complete the contract agreement within first three months of the current fiscal year. This is a bid to start the budget implementation quickly and expedite the capital spending.

According to the budget implementation action plan introduced by the Finance Ministry, projects should complete call for bid within the first month of the fiscal year which is by mid-September and in the next two months after, sign construction agreement with the contractor.

The ministry has come up the decision at a time when capital expenditure for the last fiscal year which ended on July 15, stood at only 65 percent of the total allocation.

Out of Rs 312 billion allocated for capital spending; only Rs 202.7 billion was spent.

The quality of the capital spending was also questioned as almost 36 percent of the total capital spending took place in the last three weeks of the last fiscal year.

Summoning entire government secretaries at the ministry office on Wednesday, the Finance Ministry directed them to make serious efforts to increase and expedite the capital spending.

“In a bid to ensure the better quality of capital spending, you should strictly follow the action plan prepared by the ministry,” said Finance Secretary Shanta Raj Subedi, “As the government ministries do not have to seek the permission of the National Planning Commission (NPC) before implementing projects and programmes incorporated in the budget form this fiscal year, you should immediately begin the budget implementation process.”

To expedite capital spending, the Finance Ministry, from now onwards, will also automatically approve projects and programmes sent using Line Ministry Budgetary Information System (LMBIS). The LMBIS software was introduced to make budget planning process scientific and ensure funds are not allocated for various development projects in a haphazard manner. The LMBIS makes it mandatory for ministries to clearly mention timeline for project implementation, time that would take to complete the project, challenges in implementation of the project, estimated cost of the project and expenditure plan over the years.

The capital budget is generally used to execute civil works, and purchase land, building, furniture, vehicles, plants and machinery, among others. Timely and quality capital spending is a must for a developing country like Nepal which lacks critical physical infrastructure, like hydroelectric projects, transmission lines, irrigation projects, airports and roads. Investment in these areas helps attract private investment, create jobs and spur economic growth. But Nepal has never been able to utilise capital budget efficently.