Govt adjusts budget size, hopes higher capital expenditure in second half

Kathmandu, Feb. 10

The government has lowered the estimates for the mobilisation of the development budget to Rs. 340 billion – 90 per cent of the total allocation Rs. 378 billion.

Launching the half-yearly review of the budget of the current fiscal year 2021/22 on Thursday, Finance Minister Janardan Sharma said that amidst the low performance of the development ministries and agencies, the ministry has rethought about the total performance of the capital allocation.

He also lowered the size of the total budget to Rs. 1546 billion – about 95 per cent of the total budget. This adjustment is made keeping the expenses for the local elections, vaccines against COVID-19, chemical fertilisers procurement, compensations to the farmers for the damage on their paddy and liabilities to the large projects into consideration.

In terms of recurrent expenditure, about Rs. 1035.4 billion – about 97.2 per cent – is expected to be utilised. Likewise, 90 per cent of financing budget will be used up.

FM Sharma had announced that the government would mobilise at least 30 per cent capital budget by the end of the first half of the current fiscal on 14 January 2022 but by Wednesday only 15.74 per cent of it is used up, according to the Financial Comptroller General’s Office.

“The public finance management system in the country needs structural changes but since reforms couldn’t be made in the system, the trend to spend 40 per cent of the capital allocation in the last two months of the year is likely to continue this year as well,” said Minister Sharma.

He maintained that the estimate about the budget mobilisation is kept at 90 per cent amidst the poor performance in the first half with the expectation that the expenses will go up in the second half.

 

Poor project preparedness

According to Minister Sharma, the trend of not utilizing the budget allocated to certain programmes but demanding additional budget for new progrmmmes went unabated. Some projects in the budget were included without proper arrangement of resources which means they couldn’t be implemented even by the end of this year as the time will be consumed in making initial preparations.

The Minister also stated that the selection of programmes as per the politicians’ whim or recommendations without preparedness, legal complexities and poor accountability of the project managers are the major obstacles in the development process. “There is a need of clarity about the roles and responsibilities of the governments at various levels in order to give the much needed impetus to the development work,” he said.

 

Rs. 50 billion demanded for elections

Finance Minister Sharma said that the government is under pressure to manage resources for the upcoming elections. “The government has allocated Rs. 10 billion budget for the local elections but there is a demand of Rs. 50 billion. There is high demand of budget for recurrent expenditure,” he said.

Speaking on the current impasse on the Millennium Challenge Corporation’s grant to Nepal, FM Sharma said that the project is politicized and the government is putting efforts to forge consensus among political forces and creating an environment to utilise the grant.

Speaking at the programme, Governor of the Nepal Rastra Bank, Maha Prasad Adhikari said that the provision to maintain 100 per cent cash margin while opening the Letter of Credit was implemented to nutralise the balance of payment deficit.

“It won’t have much impact on the revenue collection. We are forced to announce and implement the provision amidst growing imports and depleting foreign currency reserves,” he said.

Meanwhile, FM Sharma assured that the provision was used as a temporary measure and won’t persist for long.

Through the mid-term review of the budget, the MoF has expected a good progress at the national pride projects. It has said that the crypto currency, hyper funds and online gambling have risen as the new challenges for the government. FM Sharma expressed his commitment to check the misappropriation of foreign currencies with a thorough monitoring and regulation of such activities. 

Published in The Rising Nepal daily on 11 February 2022.