Down the drainThe government’s capital spending bunched towards the end of the year in the last fiscal cycle as well, raising questions on the quality of state expenditure.
The government’s capital spending bunched towards the end of the year in the last fiscal cycle as well, raising questions on the quality of state expenditure.
The government earmarked a budget of Rs312 billion for capital spending for the fiscal year 2016-17, which ended on Saturday. Of this allocation, 42 percent, or Rs130 billion, was used by June 24. Since then, capital spending jumped by Rs72.7 billion. This means an average of around Rs3.5 billion was spent per day between June 25 and July 15, as against the daily average of Rs0.6 billion in the entire financial year of 2016-17. This is the reason why a big chunk of development work, such as road construction, takes place towards the end of the fiscal year when monsoon starts gaining momentum.
This is not the first time capital spending has experienced a surge towards the end of the fiscal year. The same happened in 2015-16 and the year before that, indicating that this is gradually becoming a regular phenomenon. This should stop because haphazard spending results in low quality projects. This, in turn, increases public spending on repair and maintenance of such projects, leading to a waste of taxpayers’ money.
The capital budget is generally used to execute civil works, and purchase land, buildings, 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.
Yet Nepal has never been able to utilise capital budget in an effective and efficient manner. In the fiscal year 2016-17, for instance, the government was able to utilise only 65.5 percent of the total capital budget. While underutilisation of the capital budget is a big setback on its own, increased spending at a breakneck pace towards the end of the fiscal year has worsened the problem.
To avoid repeating the mistake, the government, especially the Ministry of Finance, should keep tabs on the activities of all the ministries. It should ensure that various ministries extend spending authority to different agencies right from the beginning of the fiscal year and that procurement documents required to outsource work are prepared on time. Also, issues of land acquisition and setting up of project management offices should be addressed in the initial months of the fiscal year.
If authorities fail to make timely use of available funds even after taking these initiatives, concerned officials should be made accountable. Underutilisation and year-end bunching of capital budget is tantamount to misuse of financial resources, which will suppress people’s aspirations for sustained economic development.