Many government bodies are yet to get permission from their line ministries to spend funds allocated to them, prompting concerns that the budget allocated for capital expenditure could hugely remain unutilised. 

This lax attitude has been revealed at a time when the government is being criticised for making use of only 29 percent of the annual budget of Rs 1,048.9 billion since the beginning of the fiscal year in mid-July. The revelation also comes at a time when the budget, for the first time, was introduced one-and-a-half months prior to the start of the fiscal year solely to ramp up spending.

“When ministries fail to issue spending authority on time, how can bodies under them utilise funds allocated to them?” wondered Finance Secretary Shanta Raj Subedi during an interaction attended by secretaries and other senior officials of different ministries. The worst government agency in terms of extending spending permission is the Ministry of Industry, which allowed only 69 percent of projects and programmes to make use of funds allocated to them till the first half of this fiscal year. This number stands at 73 percent for the Ministry of Energy, while the Ministry of Physical Infrastructure and Transport, which gets the biggest chunk of capital budget, has issued spending authority to only 83 percent of projects and programmes under it.

“On an average, each ministry has extended spending authority to about 80 percent of projects and programmes. This is really worrying,” said Subedi.

The Ministry of Finance (MoF), which prepares the annual budget, extended spending authority to all the ministries on the first day of this fiscal year on July 16. But it is not exactly known why different government agencies have failed to authorise bodies under them to make use of funds allotted for different projects and programmes.

This has left capital budget utilisation in a sorry state, as only 14.7 percent of Rs 312 billion allocated for capital expenditure has been spent so far. If this trend continues, we might end up with savings of over Rs 200 billion by the end of this fiscal year, which is not good for a country which lacks physical infrastructure and where poverty is rife,” said Min Bahadur Shrestha, vice chairman of the National Planning Commission.

To avert this situation, the MoF will soon start reallocating budget from projects that have not utilised funds to those in need of funds.

As per the Financial Procedures Rules 2007, ministry secretaries or department heads can reallocate up to 25 percent of funds from one expenditure topic to the other within their bodies on their own. But to reallocate more funds, they need to get MoF nod. Likewise, the MoF can transfer up to 10 percent of funds from the budget head of one ministry to the budget head of the other ministry. However, it cannot reallocate funds earmarked for capital expenditure to cover recurrent costs, such as payment of salaries.

“If reallocations do not solve the problem, we will even extend funds to projects that are not included in this fiscal year’s budget document,” said Subedi. 

Although this is not a normal practice, the government, according to Subedi, can do so if the NPC approves new programmes and projects proposed by ministries.