Donors concerned over low expenditure

The development partners have identified inability of the government to spend capital expenditure and frequent transfer of human resources two key hurdles for the development.
“Untimely transfer of project chiefs and senior officials from the implementing ministries has affected the progress in the donor-funded projects," World Bank´s country manager for Nepal Tahseen Sayed said addressing the Nepal Portfolio Performance Review (NPPR) 2012 meeting here today.
“It is unfortunate that the government has not been able to increase capital expenditure in projects every fiscal year," she said, adding that transfers have been a major obstacle to achieving targets and mobilising funds. "There have been transfers four times in a year."
Over the years, the government has been spending more than 70 per cent of the total development expenditure in the trimester – last four months – of a fiscal year, which has made projects less effective and failed to meet development needs, she added.

According to her, during the past two years, half of budgeted – and already secured – development assistance was left unspent.  “It is significant given that development assistance, on average, accounts for 25 per cent to 30 per cent of annual budget allocations.”  

A recent review reveals that public expenditure was 29 per cent higher in the fiscal year 2011-12 than it was in fiscal year 2009-10, in nominal terms, Sayed said, adding that the shortfall in budget implementation, however, stands at around three per cent of GDP or roughly Rs 40 billion every year, indicating challenges of absorptive capacity and a possible lack of realism while preparing the budget. “These issues have been further compounded by the delays in budget approvals experienced this year.”

She also stressed on need to significantly improve budget planning and execution to maximise development results, apart from strong leadership and team work for development effectiveness, and credible governance and accountability mechanisms that can directly contribute to results by making the use of public resources more efficient and transparent with strong oversight functions.
The government has failed to mobilise foreign aid despite the fund crisis in the domestic market, they said.

Likewise, the development partners also complained of delay in public procurement that has also created a slow development environment. They were also apprehensive on whether the development projects would be able to achieve the desired results due to the absence of a regular budget.

Asian Development Bank (ADB) country director Kenichi Yokoyama, on the occasion, voiced his concern over the decreasing development expenditure.
“Less development expenditure and insufficient spending in projects are the key weaknesses of  the government, he said, adding that implementation capacity and good investment are also challenges in the development sector.

The government’s data revealed that capital expenditure in the first four months of current fiscal Year 2012-13 stood to around 15 per cent of total allocation of Rs 63 billion.
However, caretaker finance minister Barshaman Pun urged donors to continue their support and assured to achieve development targets. "The government will enhance its capacity to spend in the development projects," he assured.

The meeting focused on nine different areas like agriculture, energy, local governance, mutual-accountability, procurement process and management of donor funded projects.

 The annual NPPR saw some 13 donor agencies including World Bank (WB), Asian Development Bank (ADB), JICA, DfID, EU, UN Country Team, USAID, Denmark, Australia, and Germany.