Government capital expenditure reaches nearly 50 percent after a last minute spending spreeNearly half of the capital budget has been spent after the Covid-19 outbreak, followed by monsoon season, questioning the effectiveness of the quality of works.
Until June 10, the government’s capital expenditure stood at just 30 percent of the Rs 408 billion allocated for the last fiscal year 2019-20. But on July 15, the end of the fiscal year, new figures emerged, showing a capital expenditure of 47 percent.
The figure jumped by 17 percent and this is a common occurrence where the government rushes to increase capital spending in the last month of the fiscal year. “It’s not a new phenomenon that a significant amount of capital is spent at the end of the fiscal year, which for decades have raised questions over the effectiveness and quality of works,” said economist Bishwambher Pyakuryal.
“But the last quarter of this fiscal year was different. Everyone can imagine how works have been done during the Covid-19 pandemic as well as the monsoon,” he said.
On June 10, the government eased the lockdown, allowing shops to open, vehicles to operate under the odd-even rule and projects to continue their works. Despite easing the stay-at-home orders, the development works were not carried out in a full-fledged manner largely due to lack of raw materials and shortage of workers.
“The quality of projects done during the monsoon season has been questioned for a long time. This week, the damage caused to the infrastructure of the much-awaited Melamchi Water Supply Project in Helambu Rural Municipality, Sindhupalchowk, due to floods triggered by heavy rainfall was an example of how the quality of a project is compromised during the monsoon season in order to meet the target,” said Pyakuryal.
Economists said that the overall capital spending, nearly half of the allocated amount spent on development works, was good so far even though the country’s economy was brought to a virtual standstill for almost four months due to the Covid-19 pandemic.
“This fiscal year, we can compare capital budget spending from two sides. Pre Covid-19 or before March 24 when the country imposed a complete lockdown and after Covid-19 situation,” said Economist Shankar Sharma.
The capital expenditure was “very low” before March 24, at almost 25 percent, according to the Financial Comptroller General Office that keeps track of the government’s income and expenditure and publishes details online on a daily basis.
The remaining, nearly half of the capital budget has been spent after the Covid-19 outbreak that forced the government to issue stay-at-home orders, restricting trade and economic activities. “This shows the deteriorating financial discipline of the country,” he said.
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 the capital budget in an effective and efficient manner. Multiple factors have been playing a role in dragging down government’s capital spending. One is weak planning,” said Pyakuryal.
“The capital spending by almost half of the allocated budget seems good amidst the Covid-19 pandemic situation, but there are many questions regarding how the money has been utilised in the lockdown situation as well as monsoon,” he said, adding, “This pattern of spending increases the likelihood of sub-standard quality of projects. Such projects will keep on draining more money in maintenance costs for the next few years.”