Capital expenditure still slow despite extra timeThe government has been unable to increase capital expenditure even though the date of the publication of the budget statement has been advanced through the constitution to allow more time to spend the allocated funds.
The government has been unable to increase capital expenditure even though the date of the publication of the budget statement has been advanced through the constitution to allow more time to spend the allocated funds. The date of the budget announcement was advanced to May-end from mid-July three years ago so that the government would have more time to have the budget endorsed and be able to increase capital expenditure which has routinely been falling short of the target.
But the early budget announcement has not helped the government to increase capital expenditure, according to the records of the Ministry of Finance (MoF). As per the ministry, capital expenditures in fiscals 2015-16 and 2016-17 reached 59 percent and 66 percent respectively of the targeted amounts.
In the last fiscal year, capital expenditure reached 84 percent. In the past three years, capital expenditure reached an average of 69 percent compared to the average of 77 percent in the three years before the budget date was advanced.
According to the ministry, poor accountability on the implementation side resulted in slow capital spending. “Besides, problems seen in the disbursement process are also among the main causes behind the low capital expenditure,” the ministry said in a report submitted to the parliamentary Finance Committee two weeks ago.
Revenue Secretary Shishir Kumar Dhungana said delays in land acquisition and delegation of authority had led to ineffective implementation of the annual budget despite its early announcement. “Lack of proper preparation of the envisioned projects and government agencies demanding inflated budgets not based on actual need and capacity are among the underlying problems,” Dhungana said.
Dhungana expressed doubts that there would be significant improvement in capital expenditure this fiscal year too. “Although authority has been delegated to local governments to make decisions on a number of development projects, the federal government is yet to come up with clear demarcation of the areas of expenditure.”
To tackle the persisting problem of slow capital spending, the MoF last year even issued a time-bound action plan giving line ministries deadlines to complete development works. The ministries and implementing bodies were asked to prepare procurement plans, detailed designs of the projects and cost estimates and issue tender notices within the first month of the fiscal year. They were also instructed to award the tender within the first quarter of the fiscal year. But the ministry’s plan has not shown any effective outcomes.
In a new effort to increase capital expenditure, the government has formed a five-member Public Expenditure Review Commission led by economist Dilli Raj Khanal. The government has also enforced a Treasury Single Account system to improve the budget disbursement pattern.
Citing slow capital expenditure, the parliamentary committee has given the government a time frame for spending the budget. It has been instructed to spend 60 percent of the allocated funds in the second quadrimester, 90 percent by mid-May and the remaining 10 percent in the last month of the fiscal year.