In less than one month, the government will present the budget for fiscal year 2016-2017, but records show the government treasury still has Rs 170 billion unspent, in an indication how the government has struggled to expedite capital expenditure.

According to Nepal Rastra Bank (NRB) officials, the unspent amount is the highest in the last four-five years.

Though poor capital spending is not a new phenomenon, the four-and-a-half-month-long trade disruptions and border blockade, followed by shortage of petroleum products and poor progress in post-earthquake reconstruction severely hit the government’s overall spending this fiscal.

As of April 28, capital expenditure is limited to around 20 percent while overall budget spending stands at around 39 percent.

The capital expenditure of the ministries handling key development projects has remained poor during the first nine months of the current fiscal year, according to the Financial Comptroller General Office (FCGO), which releases the budget for the development projects.

For instance, capital expenditure of the Ministry of Physical Infrastructure and Transport is Rs 11.16 billion against Rs 39.19 billion allocated. The Ministry handles major infrastructure projects like Mid-Hill Highway, North South Roads, Postal Roads and railway development.

Similarly, the Ministry of Urban Development spent capital budget of Rs 4.18 billion against the allocation of Rs 18.25 billion.

The Ministry of Irrigation which handles major irrigation projects such as Sikta, Rani-Jamara-Kulariya, and Bheri-Babai among others has spent capital budget of Rs 5.64 billion as of mid-April

against the allocated amount of Rs 18.25 billion. The Ministry of Federal Affairs and Local Development, a leading ministry in terms of capital budget, has spent Rs 6.25 billion against the allocation of Rs 16.5 billion.

While the government has struggled to expedite the capital expenditure, it has on the other hand raised internal loan of Rs 80 billion.

 “Along with poor capital spending, the government also raised Rs 80 billion internal loans, which resulted in massive amount piling up in the treasury,” said Min Bahadur Shrestha, head of Public Debt Management Department at the central bank.

With the expected shortfall of around Rs 50 billion in overall revenue collection this fiscal year as a result of the blockade and Tarai unrest, the government opted for internal loan to bridge the gap.  Although the government declared the current fiscal year as “Budget Implementation Year”, implementation part has been disappointing. 

The government officials say the lack of proper planning from the government agencies was also responsible for poor the spending pattern in the recent years, besides political volatility.

Baikuntha Aryal, joint secretary at the Finance Ministry, said some of the ministries don’t prepare activity-wise planning of budget spending before seeking budget for the development projects. Hence the result is poor spending, he said.

The poor spending of capital budget in the first three quarters was repeated this fiscal year too. “There is tendency to spend haphazardly in the last quarter just to show spending of budget and quality is compromised,” said Shankar Sharma, former vice-chairman of National Planning Commission.

“Instead of spending haphazardly, it is better for the government to plan on ways to increase spending in the next fiscal year in a timely manner.” 

The early budget presentation on May 28 as fixed by the new constitution could help spending in the next fiscal year.