Spending on first priority projects decreases in H1

- POST REPORT, Kathmandu
Spending on first priority projects decreases in H1

Feb 23, 2015-

The government has again fallen behind in spending on development projects with expenditure on first priority (P1) projects in the first six months of the fiscal year dropping to 26.46 percent of the allocated amount from 30.89 percent in the same period last year, according to a mid-term review of the budget.

P1 projects have been allocated a budget of Rs 527.36 billion out of the total budget of Rs 618 billion for this fiscal year.

Meanwhile, there has been a slight rise in expenditure on second priority (P2) projects, as per the halfway assessment report, but expenditure on third priority (P3) projects is down too.

P2 projects recorded an expenditure level of 30.51 percent in the review period this year against 30.33 percent in the same period last year. Meanwhile, spending on P3 projects came to 3.69 percent of the target this year compared to 9.1 percent in the last fiscal year.

“As the percentage of expenditure on P1 projects remained lower than on P2 projects, spending could not take place by putting key priority at the centre,” said the report. There are 339 P1 projects, 130 P2 projects and 22 P3 projects.

Since P1 projects are the largest in number and account for a huge budget allocation, the government’s overall poor expenditure pattern seems to have hit expenditure on P1 projects.

The government’s report shows that capital expenditure remained poorer this year compared to last year even though it was

expected that the spending pattern would improve under an elected leadership.

Capital expenditure during the review period stood at 12.6 percent of the target this fiscal year against 13.47 percent in the last fiscal, according to the mid-term review report.

Releasing the report on Monday, Finance Minister Ram Sharan Mahat admitted that the poor expenditure pattern could not be changed this fiscal year too despite the several measures taken to enhance spending.

He pointed out that ministries had a tendency of not making early preparation for project implementation before making demands for the budget which results in poor expenditure.

The government’s failure to spend resources can also be gauged from the fact that its treasury is holding more than Rs 90 billion currently, according to Nepal Rastra Bank (NRB). NRB Governor Yubaraj Khatiwada said that

the banking sector could face a liquidity crunch if government resources continued to remain in the treasury.

The Finance Ministry has projected that the overall expenditure will be higher at 92.63 percent from 82 percent in the last fiscal year.

“Although the expenditure pattern so far has not been encouraging, spending is expected to pick up in the second half of the year as things have started moving at big infrastructure projects with the awarding of contracts. Similarly, weather conditions have become favourable for construction and there’s the usual habit of spending during the closing months of the fiscal year,” stated the report.

Mahat said that the Finance Ministry had recently instructed the secretaries of various ministries to go for multi-year contracts for all the projects so that procedural delays would not affect expenditure.

According to the report, the ministry has projected that capital expenditure will reach 85 percent, 90 percent in the case of financing heading and 93 percent in the case of recurrent expenditure.


Expenditure in different priority projects

Allocation    Allocation    Expenditure/Allocation (%)

Priority    FY 2013-14    FY 2014-15    FY 2013-14    FY 2014-15

P1    Rs442.05b    Rs 527.38b    30.89    26.46

P2    Rs 59.63b    Rs 70.95b    30.33    30.51

P3    Rs15.54b    Rs 19.73b    9.10    3.69    

Source: Ministry of Finance

Published: 24-02-2015 09:42

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