Capital budget expenditure witnesses slight improvement

Kathmandu, Sept. 19

The government's performance in the utilisation of the capital budget has been better this year compared to the previous two years. However, in numbers, the improvement is not encouraging.

In the first two months of the current Fiscal Year 2023/24 (mid-July to mid-September), development expenditure has reached Rs. 8.35 billion which is 2.77 per cent of the total capital allocation of Rs. 302 billion, according to the statistics of the Financial Comptroller General Office (FCGO) – an agency under the Ministry of Finance that manages the treasury operation of the government.

Finance Minister Dr. Prakash Sharan Mahat had announced the budget of Rs. 1751.31 billion for this year. It also included Rs. 1141.78 billion for recurrent expenditures and Rs. 307.45 billion for financing management. The financing part of the budget is used to service the government loan while a small part of it could be mobilised as investments.

This year's performance in terms of capital budget utilisation is an 'improvement' from previous years. In the last FY 2022/23, the government could spend only 1.54 per cent of the total allocation – Rs. 5.86 billion of Rs. 380.38 billion—in the first two months.

Likewise, in FY 2021/22, the country saw one of the worst capital budget performances with just Rs. 2.61 billion utilisation (0.69 per cent of the total allocation Rs. 378 billion) in the first two months of the fiscal year.

Meanwhile, the government's recurrent expenditures have been contracted this year. It has come down to 7.87 per cent of the total allocation while in 2022/23, size of recurrent expenditure was 9.25 per cent. The total recurrent budget mobilised this year is Rs. 89.8 billion against that of Rs. 109.4 billion last year.

The austerity measures in the govrnment's expenditure might have caused this decrease in the mobilisation of the recurrent budget, as claimed by the authorities at the MoF. FM Dr. Mahat had held marathon meetings with the concerned government agencies including the Department of Customs, development ministries, Inland Revenue Department, and sub-national institutions to improve both the expenditure and revenue performance.

However, in the first two months of 2021/22 when the country was under a raging Coronavirus pandemic, recurrent expenditures had been 5.5 per cent of Rs. 1065.2 billion.

Total government expenditure so far stands at Rs. 133.5 billion – 7.63 per cent of the total budget while it was Rs. 135 billion – 7.53 per cent last year.

But government revenue collection has not been encouraging in the first two months of the year. Total revenue collection in the two months is Rs. 143.9 billion this year while it was 143.8 billion last year. According to the private sector leaders, if this festive season failed to give impetus to the market, the government revenue would be badly affected.

Last year, the government could collect about 70 per cent of the annual revenue target and there was a gap of Rs. 398 billion in income and expenditure.

The private sector businesses, including the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and Nepal Chamber of Commerce (NCC), have been suggesting the government devise strategies to boost domestic production and demand so that the increased imports could meet the revenue target. Customs duty is the second largest source of income for the government after income tax.

Meanwhile, the latest report of the Nepal Rastra Bank has shown that the country is in a comfortable position in terms of foreign currency reserves with the capacity to finance the import of goods and services for more than 10 months. 

 Published in The Rising Nepal daily on 20 September 2023.