New Government Fails to Improve Capital Expenditure; Minister of Infrastructure Development Hopes Policy Reforms Will Accelerate Progress
Image source, RSS
As the fiscal year nears its end, recent figures indicate the government has underperformed against its revenue collection and capital expenditure targets.
According to data up to mid-July (Asar 30), only about 82 percent of the revenue collection target has been achieved, and less than half of the capital expenditure target has been spent, as per the Office of the Auditor General’s statistics.
Even after 100 days since the formation of the new government, significant improvements in these figures have yet to materialize, falling short of some expectations.
How Much Has Been Spent?
The Office of the Auditor General, which maintains government financial records, states that the revenue collection target for the current fiscal year was NPR 1,480 billion, but only NPR 1,200 billion had been collected by mid-July.
Similarly, the capital expenditure target was set above NPR 400 billion, but only NPR 185 billion (45.56%) was spent by the same period.
“Payments will continue today (Wednesday). Payments until Asar 25 will be made according to instructions from relevant offices; thereafter, payments will only proceed after bill verification,” said Deepak Lamichhane, spokesperson and Deputy Auditor General of the office, on Wednesday afternoon.
“Overall, revenue collection and capital expenditure appear comparable to previous years,” he added.
According to data from Nepal Rastra Bank, capital expenditure levels have remained roughly steady over the past five years.
Last year’s capital expenditure was NPR 222 billion; three years earlier it was NPR 192 billion; before that NPR 234 billion; and previously NPR 216 billion.
Why Is It Lower This Year?
With capital expenditure only reaching 45% by mid-July, even including disbursements in the remaining two days will not lead to significant change.
“The average capital expenditure over the past four to five years has been about 62%. The main reason for the reduction this year is political instability,” said Prakash Kumar Shrestha, former vice-chairman of the National Planning Commission.
“Political instability, the Janajati Genocide (Jene Jene) movement, and the interim government have affected spending priorities,” he added.
The new fiscal year began in mid-July; a government change followed in mid-August post the Jene Jene movement, and the interim government focused on elections for six months.
Since then, the newly formed government has completed 100 days.
“Significant improvements within three months are not realistic, but the current figure is below the average,” Shrestha noted.
Minister Expresses Optimism
Infrastructure Development Minister Sunil Lamsal said the government has implemented some policy reforms and continues to enhance them, which will help increase liquidity in the market.
Despite weak government spending, Minister Lamsal told lawmakers that improvements to the Public Procurement Act will ensure more funds reach the public, improving the situation.
He explained that under the previous procurement law, contractors often submitted the lowest bids for development work, resulting in poor quality and weak cash flow.
Image source, RSS
According to him, after federalism was implemented and local authorities began issuing ‘Category D’ permits, the number of contractors rose to 32,000 within a few years, leading to fierce low-bid competition among them.
“There was a tendency to win contracts with bids lower than 46% of the estimated value. On average, contracts were awarded at about 30% below cost. While this benefited the state financially to some degree, it inflicted suffering on businesses, industries, and citizens,” Minister Lamsal said. This also caused delays in work and payment stoppages.
Although this irregularity had long been discussed, the government amended the procurement law within 100 days in response, he noted.
The revised procurement law now grants contracts to bidders nearest to the average bid price, which he describes as revolutionary.
“This new law will channel much more money into the market, improving not only the flow of funds but also the quality of construction,” the minister said. The implementation will also enhance the labor market and encourage skilled workers to remain in the country.
He also revealed that the Ministry of Infrastructure Development plans to spend about NPR 1,270 billion over the next three years.
“While the procurement law reform can aid capital expenditure, issues such as limited resources, contractor capacity, and government capability are also critical,” said former National Planning Commission vice-chairman Prakash Kumar Shrestha.
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