Capital spending at 21pc as ministries fail to use funds

March 21, 2017

The Kathmandu Post, 15th March 2017

Three government ministries that received almost half of the total capital budget have utilised only a quarter of available funds so far, prompting capital spending to slow down in the first eight months of the current fiscal year.

The Ministry of Physical Infrastructure and Transport, the Office of Prime Minister and Council of Ministers, and the Ministry of Federal Affairs and Local Development were allocated a capital budget of Rs135.9 billion for this fiscal year which began in mid-July. This amount is 44 percent of the total capital budget of Rs312 billion.

These ministries, however, spent Rs34.6 billion of the allocated funds in the first eight months of 2016-17, which is only 25 percent of the total allocation, show the latest data of the Financial Comptroller General Office (FCGO). Of the three ministries, the worst performer was the Prime Minister’s Office, which was allotted a capital budget of Rs35.3 billion in this fiscal year. This amount is 11.3 percent of the total capital budget. But the Office spent only Rs2.7 billion, or 7.8 percent, of the allocated fund in the eight-month period between mid-July and mid-March.

“Most of the capital budget allocated for the Prime Minister’s Office couldn’t be spent because of low fund absorptive capacity of the National Reconstruction Authority (NRA),” said Damodar Regmi, joint secretary and spokesperson of the Prime Minister’s Office.

Of late, the NRA has expedited the process of extending housing grants to earthquake survivors, but it has not been able to utilise the capital budget, Regmi added.

The government’s capital budget includes funds allocated for the purpose of executing civil works, and purchasing 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 improving living standard of people. But as in the previous years, ministries that are extended a big chunk of capital budget have failed to utilise the funds on time.

The Physical Infrastructure Ministry, for instance, was allocated a capital budget of Rs72.7 billion, which is almost a quarter of total capital budget. The ministry, however, spent only Rs24 billion, or 33 percent of the total budget, in the eight-month period.

The performance of the Local Development Ministry was even worse, with capital spending standing at Rs7.8 billion, or 28 percent of the total allocation. “One of the reasons for low capital spending is weak planning and inability to initiate procurement process on time,” officials of the Ministry of Finance said.

Because of this, total capital spending stood at only 21 percent of the total allocation. Different government entities spent only Rs66 billion of the total capital budget in the first eight months of the current fiscal year, show the FCGO data.