Nepal’s Capex at 5-yr-high in FY’18, Delays Continue

Nepal’s capital expenditure (capex) reached a new high at the end of the Fiscal Year 2017-18 that ended mid-July 2018.

The government’s capex saw a five-year high at Rs 267.25 billion in the ended fiscal against the actual allocation of Rs 335 billion, with Rs 108 billion spending in the last month considered as a major factor behind the rise.

Infrastructure development & construction accounted to a major share i.e., 79.7 percent of the total capital budget allocated for FY’18, the highest after 82.56 percent in FY 2012-13.

Factors Behind Rise
Provision of early budget system, releasing of full budgets to local units in three tiers, approving the programs and projects in line with the Line Ministry Budget Information System are among key factors that contributed to the rise in capex, say the officials.

“This might have played a part, if not a big part, in the increase in capital expenditure of the government. The government’s move to take action against non-performing and under-performing contractors was another reason for the rise in capital expenditure in the last fiscal year,” says Jagannath Devkota, Information Officer at Financial Comptroller General Office (FCGO).

Meanwhile, economists feel that allocation of funds to new projects outside budgetary allocation is also one of the key contributing factors to the increase.

“Funds totaling Rs 4-5 billion have been allocated for some new projects which are linked with political parties,” says Rameshore Khanal, former Finance Secretary.

In its mention about high spending in the last month, FCGO pointed that there hasn’t been any change in government’s act of late disbursement of the capital budget.

According to the regulatory, disbursing of more than 40 percent of the total capital budget has become a common trend for the country in the last five years.

Developmental Projects Hit!
Meanwhile, government officials argue that the high spending in the last month is not just for new developments and also include payments for tasks completed over the year.

On the other side, government agencies complain that the developmental projects are getting delayed due to untimely release of budgets forcing contractors to move away due to lack of needed resources.

According to the Roads Department, construction of nearly 800 bridges has been pending due to lack of required budgets.

“Thus, a large portion of payments is made in the closing months of the fiscal year. This practice hinders timely implementation of projects by contractors,” says Khanal.

Spending rush at the end of the fiscal is a clear sign of elevated fiduciary risk and improper execution of the allotted budget, says FCGO.

It’s time for the government to rethink on budget planning & execution!

Also Read : Ministries to Expedite Budget Expenditure in FY’18