While the government’s expenditure over the last six years has remained poor, performances of the donor-assisted projects have been more disappointing with spending of just 10 percent of the total allocation in the first half of this fiscal year.

Among the foreign-aided projects, those getting grants have performed relatively better than those getting foreign loans. The projects running under foreign grants were found to have spent 15.1 percent of the total grant amount, while those operating on loans spent just 5.88 percent of the loans, the mid-term review of the budget has found out.

The current budget has estimated to spend Rs 69.53 billion in grants and Rs 43.7 billion in loans. Facing a dismal performance, the Finance Ministry expects only 77.14 percent of grants and 49.18 percent of loans will be spent this fiscal.  

And this has been a trend. The mid-term review has stated that over the last six years, an average of 66.91 percent of the resources received as foreign grant has been spent while expenditure from the foreign loan is just 49.18 percent over the period.

South Asian Sub-Regional Economic Cooperation (SASEC) Information Highway Project, Micro-Enterprise Development Programme and Information Technology Development Programme under the Prime Minister’s Office are among the donor-funded projects with a dismal spending record.

According to the Finance Ministry, SASEC Information Highway Project has spent only 0.15 percent of the capital expenditure while Miro-Enterprise Development Programme has spent 1.19 percent in the first seven-month of this fiscal year.

According to officials at the Ministry of Information and Communications, expenditure remained poor in SASEC Information Highway Project as the contractor selected for laying optical fibre could not work due to  Asian Development Bank’s delay in issuing the letter of commitment. Despite forwading all related documents three and half months ago, the ministry officials said, the ADB is yet to give a clearance. But Tulasi Prasad Sitaula, secretary at the Ministry of Physical Infrastructure, claimed that road projects undertaken with foreign aid were performing well.

However, Indian-funded Postal Highway is one of the most under-performing projects as its Indian contractors have abandoned work. According to the review report, expenditure in the project has been just 6.94 percent. “Except this one, the majority of foreign-aided projects under the ministry are doing well in expenditure,” Sitaula defended.

He said that due to a longer reimbursement process, expenditure under the foreign-aid heading has not been properly reflected on the expenditure assessment. Finance Minister Ram Sharan Mahat also stressed the need for receiving timely reimbursement from donors to ensure an improved expenditure of foreign aid while releasing the mid-term review report on Friday.

The donors have been blaming high staff turnover, procurement and capacity constraints and lack of accountability as factors behind the low expenditure in foreign-aided projects. In the previous years, the donors had blamed the lack of timely budget and its approval for the low expenditure.

The Finance Ministry report has termed the lack of prioritisation of foreign-aided projects, weakness in aid-related agreements and increased trend of direct funding, assistance in commodities and technical assistance as major concerns in the foreign-aided projects. “Projects’ failure to prepare report on expenditure and inability to improve spending are other problems,” says the mid-term review of the budget, suggesting to form a taskforce to find out root causes of problems in the foreign-aided projects and solve them on the field.