Country fails to buck low capex trend againIf the government’s spending pattern is anything to go by, capital expenditure (capex) will most likely bunch towards the final quarter this fiscal year as well, resulting in construction of sub-standard infrastructure projects.
If the government’s spending pattern is anything to go by, capital expenditure (capex) will most likely bunch towards the final quarter this fiscal year as well, resulting in construction of sub-standard infrastructure projects.
The government’s capital spending hovered around Rs 35 billion in the first six months of the fiscal year, which is only 11 percent of the total budget of Rs 312 billion allocated for capital expenditure, show the data provided by the Financial Comptroller General Office.
Government’s capital expenditure includes spending on civil works, and purchase of land, building, furniture, vehicles, plants and machinery, among others.
In a country like Nepal with huge infrastructure gap, low capital spending creates a binding constraint on economic growth, delaying the process of raising living standard of people and sharing prosperity. The government’s failure to spend funds allocated for capital projects comes at time when the budget for this fiscal year was presented in Parliament one-and-a-half months prior to the commencement of the financial year.
“It’s embarrassing that the capital expenditure has failed to pick up pace in a year when budget was introduced on time and spending authority was extended by the Ministry of Finance (MoF) on the first day of the fiscal year,” said Madhu Kumar Marasini, head of the Budget and Programme Division at the MoF.
Nepal generally does not see much capital spending in the first trimester of the fiscal year because of monsoon and festivals such as Dashain and Tihar. Then in the second trimester, civil servants seeking promotions start devoting a lot of time to prepare for exams conducted by the Public Service Commission.
Many officials deputed outside Kathmandu Valley generally come to the Capital to attend these exams or make preparations for exams. “This also hits the capital spending,” said a senior official of the National Planning Commission (NPC) on the condition of anonymity as he was not authorised to speak.
As a result of slow spending in initial months, capital expenditure generally tends to bunch towards the last quarter of the financial year.
But this is not a new phenomenon.
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. The trend was the same the previous year when about 63 percent of the capital budget was utilised in the final quarter and 44 percent in the last month.
This kind of spending raises chances of development of sub-standard projects, which tends to push maintenance costs up. One of the reasons for crowding of spending in the final quarter is weak planning, officials of the MoF and the NPC say.
Although the MoF and the NPC have introduced the tradition of holding discussions with line ministries before including projects or programmes in the annual budget, these talks, more often than not, are superficial. Also, some of the projects or programmes are added to the fiscal policy in the last minute—under pressure from top political leaders or government officials—without conducting any homework.
“Because of all these, including delay in preparation of detailed project design, land acquisition, establishment of project management offices and preparation of procurement plans, capital spending gets hit,” Marasini said.