With capital spending below 40%, target seems far

Kathmandu, June 13

With only 32 days left of the current fiscal year, the government is under pressure to mobilise about Rs. 3.47 billion or so of development budget per day according to the revised figures of the total allocation.

Only 39.76 per cent of the capital budget is mobilised till Saturday, according to the Financial Comptroller General Office (FCGO)'s daily receipts and payments status report.

Finance Minister Dr. Yuba Raj Khatiwada in his budget of the current Fiscal Year 2020/21 had earmarked Rs. 352.91 billion for capital expenditure, however his successor Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has adjusted the amount to Rs. 251.62 billion in the budget of the coming fiscal year announced on 29 May.

The target of capital spending is lowered to 71.3 per cent. Likewise, recurrent expenditure target is revised to 91.4 per cent and financing to 85.2 per cent of the total allocation. Approximately 85.5 per cent of the total budget of Rs. 1474.64 is expected to be utilized this year.

It was the second time the budget was revised. Earlier, in the mid-term review of the budget of the current FY, the Ministry of Finance (MoF) had revised the estimation of income and expenditure to 91.19 per cent.

The MoF said that the obstructions created by the global COVID-19 pandemic in the development works had impacted the budget spending. Most of the large and medium infrastructure projects including the national pride projects were affected by the crisis resulting in time and cost overrun.

However, positive results of the business and economic rehabilitation programmes like refinancing, concessional loan and business continuation loan has increased the hopes for higher economic growth this year, the MoF states.

Striking on the same line, DPM Poudel had set the growth target of the Gross Domestic Product (GDP) for the current fiscal year at 4 per cent. However, the World Bank's estimate has put the figure to 2.7 per cent. The government has also expressed doubt to achieve the target as the economy and businesses were battered by the second wave of the pandemic.

According to the Federation of Nepalese Chambers of Commerce and Industry, 70 per cent or so business enterprises have been directly affected by the COVID-19 and lockdown announced to check the spread of the virus.

 Budget allocation, target and status (Rs. in billions)

Description	Allocation	Revised	Exp. Status (up to 12 June)	Status %
Recurrent	948.94	867.33	694.70	61.52
Capital	352.91	251.62	140.32	73.21
Financing	172.78	147.20	72.15	39.76
Total	1474.64	1266.71	907.18	41.76

Source: FCGO

Meanwhile, a year-on-year comparison of the capital spending has indicated at better situation this year compared to the last fiscal.

The capital expenditure remained all time low at only 47 per cent of the total budget of Rs. 408 billion in the FY 2019/20. As the country was under strict lockdown for the last four months of the fiscal, the government found it hard to run the development projects and mobilise the budget.

Coupled with the shrinking private sector business activities, the poor capital expenditure resulted in negative economic growth of 2.12 per cent in 2019/20.

However, the FCGO has the expectations that that capital budget mobilisation could reach about 70 per cent. "Unlike during the lockdown last year, work at development projects is not completely halted this year while many contractors submit the claims for payments at the end of the fiscal year. So we can hope the spending significantly go up this month," said Gyanendra Paudel, Spokesperson of the FCGO.

Published in The Rising Nepal daily on 14 June 2021.