Government spends only 6 per cent of capital expenditure

The government failed to expedite the capital budget expenditure and spent only 6.05 per cent of the total budget – in the first four months of the current fiscal year – despite need of huge cost for the federal structure to sustain.
Of the total Rs 408 billion capital budget for the current fiscal year, the government has spent only Rs 24.71 billion from mid-July to mid-November, according to Financial Comptroller General Office (FCGO).
The government bodies are usually busy devising plans and preparing for developing procurement procedures during the initial days of every fiscal year but decreasing spending capacity of the government, age-old bureaucracy and corrupt governance contributed to the low spending of the capital budget.
In the last fiscal year too, the government failed to spend, as it was able to spend 73.4 per cent of the total development budget. “The low spending in the first trimester will put the government under tremendous pressure this fiscal year too,” according to an official in the Finance Ministry. The last minute spending in the development works means only to meet the spending target but the quality of the work is always under question.
Last year, the government had spent only 35 per cent of the total capital budget of Rs 313.99 billion, while 16.4 per cent of the budget was spent in the last one week alone raising the question of the quality of the work.
The 56th annual report of the FCGO also showed that the government had spent 40 per cent of the total capital budget of Rs 108 billion in the last month of the fiscal year 2017-18. The last month and last week spending is, though financial crime, the two-third majority powerful and stable government of Prime Minister KP Sharma Oli has failed to boost the spending let alone meet the revenue mobilisation target.
The Constitution mandates a government to bring the budget before one-and-a-half months in advance, which will help approve the budget from the parliament before the fiscal year begins. But the constitutional provision also failed to expedite the capital expenditure.
Though, the finance minister Dr Yuba Raj Khatiwada has been defending the worst performance saying that the government’s focus has been diverted to the other actions, the failure is also attributed to the lack of preparations of the projects before budgeting. The government has brought Rs 1.53 trillion budget for the current fiscal year 2019-20. “Of the total Rs 957 billion recurrent budget, the government has spent 20.57 per cent in the four months of the current fiscal year,” according to the FCGO.

Half of capital budget yet to be spent, and in 10 days?

The historically strong and stable government led by Prime Minister KP Sharma Oli has miserably failed to expedite the development budget as it is yet to spend more than half of the development budget – allocated for the current fiscal year – but there is less than half-a-month to end the fiscal year.
The government has spent only 48.89 per cent or Rs 154.38 billion, out of the total Rs 313.99 billion development budget for the fiscal year 2018-19, till today – June 20 – according to Financial Comptroller General Office (FCGO).
Though, the Finance Ministry had revised the capital budget for this fiscal year downwards to Rs 265.20 billion – some 15.5 per cent down from the previous allocated capital budget of Rs 313.99 billion – through the mid-term budgetary review due to its failure to boost capital formation programmes and tepid progress of development projects, the development budget spending stands at 71 per cent, of the revised allocation also. However, it could not be called legal as the figure is not approved by the Parliament. The development budget figure of Rs 313.99 billion is approved by the Parliament, and is legal, whereas the revised data is only for the reference of the Finance Ministry.
According to the FCGO, the government has been able to spend – including capital expenditure, financing and recurrent – some 64.12 per cent of the total budget of Rs 1.31 trillion for the current fiscal year 2018-19.
The government has spent Rs 619.29 billion as recurrent expenditure – of the total Rs 845.45 billion – till today, the FCGO data revealed. The recurrent expenditure is primarily the spending of the government on non-capital formation programmes like salaries of government staffers, social security and other expenses, though some of the development projects also get budget through recurrent budget.
Likewise, the government has spent some 44.74 per cent to Rs 69.66 billion – out of the total allocated budget of Rs 155.72 billion – on financing till today, according to the FCGO data. Financing is primarily the interest served for the domestic and foreign borrowings.

Provincial budgets follow wrong precedent of federal budget, distribute budget to parliamentarians

Following the wrong precedents of the federal government, the provincial governments distributed the budget to parliamentarians, in one name or the other, which is a gross misuse of the public tax money. 
Unveiling their third budget – though practically second one as provincial election was not completed then – nearly three weeks after the Federal Budget 2019-20, the seven provinces, however, claimed that they have focused on infrastructure including including cable car, monorail and tunnel roads, and social development.
The provincial governments tabled a total budget of Rs 2. 596 trillion. The provincial budget has increased by 25.55 per cent compared to last fiscal year’s budget. Province 3 has tabled the highest budget of Rs 47.50 billion, whereas Far West Province has tabled the lowest at Rs 28.16 billion.

Province 1
Province 1 Minister for Economic Affairs and Planning Indra Angbo tabled a budget of Rs 42.20 billion. “Of the budget, Rs 18.54 billion is allocated for recurrent expenditure and Rs 23.57 billion for capital expenditure,” he said, adding that education sector will receive Rs 1.28 billion, drinking water and sanitation Rs 3 billion, and irrigation will get Rs 3.2 billion.

Province 2
Province 2 government presented a budget of Rs 38.72 billion. “Out of the total budget, Rs 19.11 billion was allocated for recurrent expenditure, whereas Rs 19.26 billion is for capital expenditure,” the Province 2 government said adding that the government has announced Rs 30 million for each constituency in accordance with the Constituency Infrastructure Development Special Programme. “The budget has also focused on agriculture, education and health.”

Province 3
Province 3 Minister for Economic Affairs and Planning Kailash Prasad Dhungel announced a budget of Rs 47.6 billion for the next fiscal year. “The budget has allocated Rs 24.46 billion for recurrent expenditure and Rs 22.03 billion for capital expenditure,” he said, adding that the budget will focus on developing infrastructure including ring roads and tunnels across several parts of the Province, tourism development, agro-sector modernisation, and community farming.

Gandaki Province
Gandaki Province Minister for Economic Affairs Kiran Gurung tabled a budget of Rs 32 billion. “Of the total budget Rs 12.28 billion as been allocated for recurrent expenditure and Rs 19.85 billion for capital expenditure,” he said, adding that the government has focused on programmes and policies announced from the last fiscal. “Additionally, it has allocated ample funds for the construction of ‘national pride projects’ within the province.”

Province 5
Province 5 Chief Minister and Economic Affairs and Planning Minister Shankhar Pokharel announced the budget of Rs 36.41 billion for the next fiscal year. “Rs 13.45 billion has been allocated for recurrent expenses and Rs 18.57 billion for capital expenditure,” he said, adding that the budget has given top priority to infrastructure and tourism development, agriculture sector commercialisation and mobilising the sector to eliminate unemployment, and completion of Gautam Buddha International Airport.

Karnali Province
Karnali Province Minister for Economic Affairs Prakash Jwala unveiled a budget of Rs 34.35 billion. “The budget has allocated Rs 13.05 billion for recurrent expenses and Rs 21.29 billion for capital expenditure,” he said, adding that the Karnali Province government has prioritized agriculture, infrastructure and tourism sectors, setting up the Karnali Infrastructure Development Authority as part of the budget allocation of Rs 1.2 billion for the infrastructure sector.

Sudurpaschim Province
Sudurpaschim Province Minister for Economic Affairs Jhapat Bahadur Bohara tabled a budget of Rs 28.16 billion today. “The budget has allocated Rs 12.57 billion as recurrent expenditure and Rs 13.06 billion as capital expenditure,” he said, adding that the government has prioritised agriculture, drinking water, energy, irrigation, infrastructure and roads. “The budget has also focused on promotion of a model agriculture village with Rs 5 million budget for every local unit.”

10 ministries spend less than 10 per cent capital budget

The government agencies are losing their institutional capacity to expedite capital spending.
"Ten ministries and central authorities have been able to spend less than 10 per cent of their total capital budget by January 27,” says Financial Comptroller General Rajendra Prasad Nepal.
Likewise, 12 ministries have been able to spend between 10 per cent to 20 per cent of the allocated development budget, while only seven ministries have been able to spend between 20 per cent and 25 per cent by January 27, he added.
Population and Environment Ministry has managed to spend a paltry 0.72 per cent of its development budget, followed by Supplies Ministry (3.03 per cent), Youth and Sports Ministry (4.08 per cent) and Foreign Affairs Ministry (5.16 per cent). While Industry Ministry has spent only 7.94 per cent of its capital budget; Culture, Tourism and Aviation Ministry has managed to spend 8.39 per cent by January 27. "The other central authorities that are the Office of President and Office of the Prime Minister have also spent less than 10 per cent of their capital budget," Nepal informed.
On one hand the ministries have been unable to spend, and on the other they have been asking for more budget from out of the budget programmes. "Though the ministries have failed to spend, they have asked for more capital budget," finance secretary Shanta Raj Subedi said.
Ministries have sought additional budget of Rs 215 billion, which is nearly 69 per cent of the total capital budget, he said, adding that the inefficiency of ministries was worrying.
Inefficient bureaucracy, procedural hurdles, lack of carrot and stick policy, and ad hoc budget preparation process are blamed for low capital spending that could have contributed to not only in employment generation but also in economic development in the long run.
Nearly half a dozen ministries, including Education Ministry, Health Ministry, Agriculture Development Ministry, Physical Infrastructure and Transport Ministry and Irrigation Ministry that have the largest chunk of budget have failed to spend. They hold some 44 per cent of the total budget, according to Subedi.
“Their performance has not been satisfactory,” Subedi said, directing the ministries to either surrender the unspent budget or spend them effectively.
According to the Financial Comptroller General's Office, the government has been able to spend only 14.73 per cent of the total capital budget by yesterday. The erstwhile government, led by KP Oli, had brought Rs 1048.92 billion budget. Most of the secretaries of the related ministries, however, claimed that they were not consulted in the budget preparation process. They said that the budgetary allocation is of ad hoc nature.
The government so far has been able to spend Rs 45.96 billion capital budget which is 14.73 per cent of the total capital budget. The government has, by yesterday, been able to spend a total of Rs 304.60 billion that is only 29.04 per cent of the total budget.

Rs 34 billion reimbursements still to be claimed
KATHMANDU: The government is yet to claim reimbursements worth Rs 34 billion from different development partners. According to Financial Comptroller General's Office, many projects, which have already been closed, also have claims for reimbursements. Some 16 ministries have failed to claim reimbursements even though projects under them have already been closed,” Financial Comptroller General Rajendra Prasad Nepal said, adding that it has added additional financial burden on the government. "The ministries have to show more urgency to get reimbursements in time."

PM directs ministers, secretaries to expedite development spending

Prime Minister Puspa Kamal Dahal today directed the government officials and ministers to expedite development spending and prepare criteria for qualifying projects as national pride projects.
Addressing the ministers and secretaries of various ministries during the meeting of National Development Action Committee (NDAC) – the prime minister-led mechanism that looks after the development projects – Dahal asked them to spend at least 80 per cent of the development budget citing there has been no significant progress when compared to the previous fiscal year, which had retarded the economic growth of the country.
Accepting the government’s apathy toward development work, he also directed the ministers and secretaries to prepare unified development plans and implement them accordingly to show the outcomes.
"As we have envisioned moving towards higher growth trajectory to upgrade our status to a middle-income country by 2030, we have to fully implement the budget to achieve the desired results," he said also instructing them to conduct regular monitoring of top priority projects – P1 projects – and introduce ‘carrot and stick’ policy targeting the project chiefs.
Asking them to prepare criteria for qualifying projects as national pride projects, Dahal also directed them to come out with a concrete plan, to complete the national pride projects, within a month.
Prime minister expressed concerns over dismal progress of critical projects including Kathmandu-Tarai fast track, Budhigandaki Hydroelectric Project, Second International Airport in Nijgadh, West Seti Hydro Project and Postal Highway.
The concept of national pride project was first introduced in 2012 in a bid to expedite the construction of schemes considered to be crucial for the country’s sustained development. However, there is no standard process based on which a project is described as ‘national pride’.
Currently, 21 projects have been identified as national pride projects. They include four irrigation projects, three hydropower projects, three international airports, six road projects, an electric railway project, a drinking water project, two projects aimed at promoting the holy sites of Pashupati and Lumbini and an environment conservation project.
The completion of these projects, according to experts, can change the face of Nepal and put it on a high growth trajectory. However, more than half of these projects failed to meet 50 per cent of their performance target in the first four months of the current fiscal year, according to the latest report of the National Planning Commission (NPC).
The Kathmandu-Tarai Fast Track Project, for instance, met only 0.1 per cent each of the physical and financial targets, making it the worst performer in the first four months of this fiscal year.
Likewise, the 1,200-MW Budhi Gandaki Hydroelectric Project has met only 1.1 per cent each of the physical and financial targets. Another worst performing project is the Lumbini Area Development Trust, which has achieved 7 per cent of the physical target and 10 per cent of the financial target.
Some of the common problems faced by these projects are delays in land acquisition, disputes between project officials and locals over the compensation amount offered by the government, unclear relocation and resettlement strategy, lack of coordination among officials and protests launched by their staff.
“Many projects also face problems while conducting Initial Environment Examination (IEE) and Environmental Impact Assessment (EIA),” said NPC vice chair Min Bahadur Shrestha, on the occasion. “We will list all the problems faced by these projects and try to address them by providing them certain benefits as directed by the prime minister," he added.
“If the bureaucracy continues to follow its traditional approach toward development works, we are not going to get any outcome,” the Prime Minister said, asking to change their working culture. "We have to think unconventionally to ramp up the capital expenditure."
Speaking at the meeting, the secretaries of various ministries updated PM Dahal on the progress of development projects being implemented under them.
Earlier in September too, PM Dahal had said that he would personally monitor the implementation status of national pride projects. Addressing the NDAC meeting, Dahal had said that he would prepare the schedule for implementation of concerned projects and monitor their progress.
His instructions, however, failed to speed up development spending. The government has, according to the Financial Comptroller General’s Office (FCGO), been able to spend only 8.89 per cent of the total capital budget by yesterday.
The first half of fiscal year is ending in mid-January. And of the total development budget of Rs 311.94 billion, the government has been able to spend only Rs 27.71 billion by January 1, according to the FCGO. Of the total budget of Rs 1048.92 billion, the government has managed spend only Rs 232.85 billion till yesterday.
The government had tabled the budget – for the current fiscal year 2016-17 – one-and-a-half months before the start of fiscal year calendar to break the trend of slow capital expenditure. However, the situation in the current fiscal year is no better than the last fiscal year.
While the government has not been able to spend, revenue mobilisation has been exceeding the target. As a result, the government treasury is ballooning. The government is sitting on a cash pile which is neither being productive, nor contributing to the economy. Had the government been able to spend, the private sector would have felt encouraged to spend, resulting in capital formation. However, the bulging treasury caused by the government’s inefficiency will hurt the economic growth and slow down capital formation in the coming fiscal years too.

Nepal to grow by 0.5 percent: IMF

A couple days after the World Bank cut Nepal's economic growth forecast for the current fiscal year 2015-16 to 1.7 per cent, International Monetary Fund (IMF) has even lowered the growth forecast to 0.5 per cent.
Like the World Bank, the IMF has also attributed trade disruptions along Nepal-India border points, delay in execution of post-earthquake reconstruction works, and unfavorable monsoon that will hit output of goods and services for the lower economic growth.
The growth projection of the IMF – published in World Economic Outlook Report – is the lowest in the last 14 years.
Though the government has projected economic growth to be around 2 per cent, another multilateral development partner Asian Development Bank (ADB) recently forecast 1.5 per cent economic growth in the current fiscal year.
Though all of them have pointed out the devastating earthquakes a year ago – on April 25 and May 12 – and subsequent aftershocks, delay in reconstruction works due to political bickering and border obstructions for almost four months after the promulgation of constitution as the major factors that have pulled the economic growth down, their forecast has been different.
The massive devastation – that floored around 800,000 houses, apart from cultural heritage sites, and public buildings including schools, hospitals and police posts – had pulled down economic growth to 3.04 per cent in the last fiscal year 2014-15, from projected 5.5 per cent. The natural disaster had damaged the assets, but the India-imposed economic blockade for almost 4 months hit the income of the people resulting to heavy loss that is pulling economic growth down between around 2 per cent and 0.5 per cent.
The four-month blockade not only created supply disruption but also dealt a severe blow to industries and lowered consumption. On top of the natural disaster and blockade, the government also failed to spend capital budget that could have created employment and lay the foundation of economic activities and capital formation.
According to the Financial Comptroller General's Office, the government has been able to spend only 16.61 per cent of the capital budget in the first nine months of the fiscal year. Of the Rs 208.87 billion capital budget, the government has been able to spend only Rs 34.69 billion. The inefficient bureaucracy and low political willingness failed the country, hitting not only the economic growth but also pushing the country backwards to around a decade.
According to the IMF report, all these problems are expected to push Nepal to the third lowest rung of the economic growth ladder in Emerging and Developing Asia in the current fiscal year.
In the group of 29 developing countries, Nepal is only above Mongolia, which is likely to post a growth of 0.4 per cent, and Brunei Darussalam, whose economy is expected to contract by two per cent this year, the report read, adding that the inflation, however, is likely to hit double digit at 10.2 per cent. "Such a jump in prices of goods and services will make Nepalis feel poorer because their income is not expected to go up in line with the expenses," the report stated.

Last trimester sees surge in spending, despite ceiling

The government spends more than half the development budget of any given fiscal year in the last four months of the fiscal year, and almost 40 per cent of it in the very last month.
The average development spending in the last four months over the last three fiscal years has been 'not surprisingly' 57.42 per cent on an average, according to data from the Financial Comptroller General's Office (FCGO).
While the government's eroding capacity to spend and lack of coordination among the key stakeholders have been largely blamed for the low level of development spending, it is more a case of 'political failure', according to former chief advisor to the Finance Ministry, Keshav Acharya.
The last month of the fiscal year sees around 40 per cent of the development spending despite the ceiling, he said, adding that lack of coordination among the prime minister, the vice-chairman of the National Planning Commission (NPC), the finance minister and the ministers at the implementing ministries has been a major problem in expediting the use of the development budget, he said, adding that the spending has been particularly low when a coalition government is in power.
According to FCGO data, successive governments have been able to spend only 6.33 per cent of the development budget on an average in the first four months, whereas the second four-month period sees an average of 15.26 per cent development spending. The spending all of a sudden surges to an average of 57.42 per cent in the last trimester, the data shows. Within the last trimester also, the very last month witnesses the spending of around 40 per cent of the development budget, Acharya added.
FCGO data also shows that the total average development spending in the last three fiscal years has stood at 78.96 per cent.
Joint Financial Comptroller General Kewal Prasad Bhandari attributes the low development spending to lack of seriousness in the bureaucracy and the absence of adequate budget law. "There is no schedule for budget spending," he said, adding that the lack of a carrot and stick policy has also left the officials responsible not in any hurry to spend.
The story is going to be repeated in the current fiscal year, 2015-16 too.
According to FCGO, the government has been able to spend only 13.83 per cent of the total development budget as of yesterday. "The remaining four months will as usual see a spike in the spending," Acharya said, adding that the government, meanwhile, has the convenient excuse of the earthquake and the Indian economic blockade for not being able to spend adequately.
The government now has a challenging task of spending Rs 1.66 billion out of the development budget every single day, if it is to meet the expenditure target for the current fiscal year.
According to FCGO data, the government has been able to spend only Rs 28.88 billion, or just 13.83 per cent, of the development budget so far as of March 24. Only 108 days remain in the current fiscal year, which ends in mid-July, and the government still has to spend Rs 179.99 billion development budget. The arithmetic means the government will have to spend Rs 1.66 billion ever day to meet the target for development spending.
Dr Ram Sharan Mahat, who was finance minister in the last government, had allocated Rs 208.87 billion for development spending for the current fiscal year. However, the post-earthquake situation and the fuel shortage caused by the Indian blockade following the promulgation of the new constitution on September 20, 2015, rendered the government simply unable to spend its development funds.
Mahat last July 14 had presented a budget of Rs 819.47 billion for the current fiscal year, and the incumbent government has been able to spend only Rs 274.55 billion, or 33.50 per cent, of the total budget, according to FCGO.
The budget allocated Rs 484.27 billion for recurrent expenditures such as salary payments for civil servants, grants to local bodies and interest payment; Rs 208.88 billion for capital expenditure such as spending on civil works, purchase of land, building construction, procurement of furniture, vehicles, plants and machinery; and Rs 126.32 billion for the financing provision, which includes lending to state-owned enterprises and repayment of principal.
According to FCGO data, the government has been able to spend Rs 201.50 billion, or 41.61 per cent, under the recurrent budget, and Rs 44.15 billion or 34.95 per cent under the financing provision.
The budget has also allocated Rs 91 billion for the reconstruction of structures damaged by devastating earthquakes in April and May. But the incumbent government and the National Reconstruction Authority (NRA) are in no hurry to provide shelter to the homeless despite their plight in the winter that is going to be worse in rainy season in a month. They have already announced that the reconstruction work will only start after April 25, which will mark the first anniversary of the devastating earthquake.

Finance minister unveils post earthquake reconstruction budget of Rs 819.47 billion

Finance Minister Dr Ram Sharan Mahat today presented a post-disaster reconstruction budget of Rs 819.47 billion for the next fiscal year 2015-16.
Presentation the budget at the Legislature Parliament, Mahat said that budget for the next fiscal year is 32.6 per cent more than the budget for the current fiscal year. "The government plans to mobilise Rs 475.01 billion (59 per cent) from revenue, Rs 2 billion from principal repayment, Rs 110.93 billion (14 per cent) from foreign grant, Rs 88 billion (11 per cent) from internal borrowing, and Rs 94.96 billion (12 per cent) from foreign loans," he said, adding that the current fiscal year's savings of Rs 48.56 billion will also be used to fund the budget. "The savings from the current fiscal year and principal repayment will make up four per cent."
The expansionary budget has earmarked Rs 484.27 billion (59.1 per cent) for recurrent expenditure, Rs 208.87 billion (25.5 per cent) for capital expenditure and Rs 126.33 billion (15.4 per cent) for financial management provisions.
With priority for reconstruction – after the devastating earthquake of April 25 and subsequent aftershocks – the budget aims to boost people’s confidence on government by prioritising relief, reconstruction and rehabilitation works in the aftermath of the devastating quake, he said, adding that the government has allocated Rs 74 billion for the National Reconstruction Fund, while Rs 17 billion is provided directedly to the concerned authorities until Reconstruction Authorities comes into operation. "The government will not let people of earthquake-hit region feel lack of budget."
Urging private sector to cooperate with the government in reconstruction campaign, Mahat said that National Reconstruction Authority will be given a full shape soon. Pledging to train government staff for disaster management, he said that heritage sites will be prioritised during the reconstruction to revive tourism. "The government will leave no stone unturned to revive tourism," he added.
The socialism-tilted budget – unlikely from Mahat's past six budgets – aims at exploiting internal resources to its maximum, progressing in economic and social index, effectively completing the reconstruction work by issuing reconstruction bonds, Mahat said presenting his seventh budget. The budget has doubled senior citizen allowance to Rs 1,000 per month from Rs 500, he added.
Likewise, the budget promised to train as many as 50,000 youth for reconstruction work.
It will help create employment opportunities, he said, adding that the government will also organise an Investment Conference in the next fiscal year to promote foreign investment.
Minister Mahat said the government is likely to mobilse only 93 per cent of the revenue target for the current fiscal year, due to the devastating earthquake of April 25. "The earthquake is likely to increase poverty," he said, adding that the government will, however, try to restrict it to 25 per cent. "The government is facing a serious challenge to maintain economic growth rate above eight per cent to graduate from the least developed countries (LDC) to the developing country by 2022."
However, the budget has targeted six per cent economic growth for the next fiscal year.
The budget has also pledged its support to Constituent Assembly (CA) for fast-track constitution writing and holding of local body elections, apart from supporting cement industry for access road construction, completing construction of Postal Highway within the next five years, continuing multi-year contract system, and arranging additional budget for projects and programmes facing budget deficiency on basis of their work progress.
Earlier, a meeting of the cabinet in the afternoon has endorsed the budget for the next fiscal year before presenting it to the House.

National pride projects fail to perform, under utilise budget

Despite timely budget for the current fiscal year, the government has miserably failed to expedite the development projects that could have not only generated employment but also pushed the economic growth.

The government has been able to spend only Rs 2.82 billion, which is only 12.9 per cent of the total budget Rs 21.85 billion for the total 21 national pride projects.

The national pride projects include large-scale hydro – like 750 MW West Seti Hydropower and 456 MW Upper Tamakoshi Hydropower – irrigation projects –  like Sikta, Ranijamara-Kulariya and Babai – and international and regional airports like Pokhara and Bhairahawa, and highways like Fast Track, Mid Hill Highway and Postal Highway but the delay in implementation, lack of coordination among various state agencies, problems in land acquisition have taken toll in the development, according to the mid-term review of the budget.

The three projects – Bhairahawa Regional International Airport, Second International Airport and West Seti Hydropower Project – have become the poorest performers with no spending, the report stated, adding that the West Seti Hydroelectric Project has not yet completed feasibility study, whereas second international airport in Nijgad has been delayed due to confusion on construction modality.

Similarly, Bheri-Babai Diversion Multipurpose Project – that could also generate 48 MW electricity and provide irrigation facility to 60,000 hectares of land in Bardiya and Banke – has also been able to spend only Rs 3.31 million out of its Rs 1.01 billion budget.

Babai Irrgation Project project was started in 1989 with an objective of irrigating 36,000 hectares of land, and Banke-based Sikta Irrigation Project is expected to irrigate some 42,766 hectares of land. Sikta Irrigation Project has been able to spend around quarter of its total budget of Rs 1.14 billion budget.

Likewise, Ranijamara Kulariya Irrigation Project has spent around 33 per cent of its total budget of Rs 1.25 billion.

Likewise, Kathmandu-Terai Fast Track Project – that has been allocated Rs 500.31 million for this fiscal – has been able to utilise only Rs 3.92 million that is less than one per cent of the total budget in the six month of the current fiscal year also due to private sector's lack of interest in the project. The project was supposed to be constructed in public-private partnership model.

Yet another project that has become a prestige issue for the Asian Development Bank, Melamchi Water Supply Project, has been able to spend only Rs 638.50 million that is 12.18 per cent of its total budget of Rs 5.24 billion.

Of the five components of the Melamchi Water Supply Project, the tunnel – one of the major components – has started after a long disturbance and the project that took 15 years has set postponed the deadline for completion.

The report also stated that the national priority projects were selected without any solid basis. "The numbers of national pride projects increased but they have been just occupying huge resources without implementation,” it stated, adding that Mid Hill Highway has spent 17.12 per cent of the budget in the six months. "Only 1.5-km of track has been opened, with the graveling of one-km being completed in the western sector of the 1,108-km long highway. Likewise, in the eastern section, only four-km road has been graveled with eight-km being black-topped."

The Postal Highway has been able to spent only Rs 153.65 million out of its total budget of Rs 2.21 billion, whereas Budhigandaki Hydroelectric Project has spent the largest above 60 per cent of its Rs 260.99 million budget followed by Pashupati Area Development Fund that has reported some 59 per cent spending, the report stated.

Under utilisation of budget by the development projects is a serious concern for the government," finance minister Dr Ram Sharan Mahat said, addressing the mid-term budget review meeting here today. "If it continues, budget for under-performing projects would be transferred to other projects that are moving smoothly and demanding more funds for their speedy completion.

Surprisingly, all most all of the projects are under multi-year budgetary framework that needs no separate approval every year as they are prioritised.

Government 'still' claims 5.5 per cent growth possible, inflation target revised upward to 8.5 per cent

Despite low capital expenditure and less borrowing from the private sector followed by rising inflation, the government today claimed that it still could achieve the 5.5 per cent economic growth rate targeted by the fiscal policy and supported by monetary policy.

Better performance of the agriculture and service sectors would help achieve growth for the current fiscal year, said finance minister Ram Sharan Mahat at the Mid-Term Budgetary Review for the current fiscal year 2013-14, here today at the Finance Ministry.

"Positive political developments and its impact on investments apart from good agricultural output will also help achieve target economic growth rate," he said, adding that the industrial sector is, however, still poor. "Seven to eight per cent growth is possible only by increased investment and its efficiency."

The five-time finance minister Mahat also lamented the poor investment performance by both the government and private sectors.

"The failure to spend capital budget has swelled government treasury apart from low borrowing from the private sector that has flooded the banking system with excess liquidity,' he said, adding that it could, however, hit the growth prospects.

The government has Rs 65 billion in its treasury at the moment, while banks and financial institutions have excess liquidity of around Rs 50 billion.

As of February 27, the government has been able to spend only 19.72 per cent capital expenditure, according to Mahat. "However, there is still an additional demand of Rs 20.89 billion but in the unproductive sectors."

The minister also said that he would cut the budget of the projects failing to spend and divert the funds to better performers.

While, the capital budget has shown poor performance, the recurrent expenditure has seen increment. "There has been an additional demand of Rs 12.84 billion under the recurrent budget by security agencies, increased salaries of government employees and a rise in expenditure for foreign trips and the Constituent Assembly (CA) election, he added.

However, the government is planning to bring guideline to reduce recurrent expenditure.

Hoping that an early budget could help ensure the better capital expenditure, he said the government is planning to bring the budget before the fiscal year ends.

Inflation target revised upward

KATHMANDU: The mid-term budget review has revised inflation upward to 8.5 per cent from eight per cent. A rise in money supply due to the second CA election and supply constraints that led to an increase in food prices pushed the inflation to double digit in the fifth month. Mahat said that food prices jumped by 13 per cent despite increased production which suggested that there is a problem in the supply system due to middlemen. The review also suggested to address supply related problems to reduce inflation, apart from monetary instrument.

Trade deficit to continue to balloon
KATHMANDU: The review has also showed serious concern on ballooning trade deficit. Trade deficit stood at Rs 288.76 billion in the first half of the current fiscal year, whereas the ministry has estimated it to reach Rs 550 billion by the end of the current fiscal year. The total trade deficit stood at Rs 480 billion in the last fiscal year. The remittance cannot help float the economy, Mahat said, adding that there is an urgent need to enhance competitiveness of domestic products and increase exports.

Budget downsized to Rs 479billion
KATHMANDU: Through the mid-term review of the current fiscal year, the government has also downsized total budget for fiscal year 2013-14 to Rs 479 billion from Rs 517.24 billion. The government revised the budget due to low capital spending during the review period, said the finance minister.