Unconventional measures required to raise public spending

Kathmandu, July 27

A snapshot of what the government should do to ramp up public spending was shown today during a meeting between top civil servants and high-ranking officials of the Asian Development Bank (ADB), the Manila-based multilateral lending institution.

Dubbed the Tripartite Portfolio Review Meeting (TPRM), it brought together top officials of the Ministry of Finance, various project executing and implementing agencies, and the ADB, one of the biggest lenders to the government.

For sake of formality?

The meeting was called to discuss delays in implementation of ADB-financed projects and low disbursement of funds pledged by the multilateral institution.

Although the tripartite meeting, comprising the ADB, was held for the first time in Nepal, it is not that meetings of these types have not been held here before.

So, there was certainty that this meeting would also repeat catchphrases, such as ‘lack of project readiness’, ‘weakness in the government’s budget execution processes’, ‘delay in procurement process’, and ‘overall weak project planning and implementation capacity’.

There is no doubt that these problems are the biggest speed bumps on the way towards increasing public spending and fund disbursement.

But has repetition of these phrases over and over again during numerous meetings held in the past produced desired outcomes?

Probably not.

Had they, Nepal would not have earned the reputation of being a country which has repeatedly failed to fully utilise capital budget in at least a decade.

This means many of the meetings that are held to review performance of projects have failed to create an impact.

And one of the reasons for this is lack of participatory approach of these meetings.

These kinds of meetings usually comprise a handful of speakers, who generally make lengthy and boring presentations, while others just listen without much interest, play with their smartphones, scribble on their notepads or check the time on wristwatch time and again, even letting out a big yawn.

So, many of these meetings are attended merely for the sake of formality.

Different approach

At the outset, today’s TPRM also showed no signs of being different than project performance review meetings held in the past. So, many were prepared for boring back-to-back presentations.

But as ADB’s South Asia Energy Division’s Hiroki Kobayashi started making his conventional presentation on performance of energy-related projects in Nepal, Hun Kim, director general of ADB’s South Asia Department, intervened.

His concern was that Kobayashi should not waste his time making long, meaningless presentation and instead focus on identifying problems in projects and let officials of executing agencies, such as the Ministry of Energy, and implementing agencies, such as Nepal Electricity Authority, explain the reason behind delay in project implementation.

This implied the meeting had to find out the crux of the problem and recommend measures to deal with these issues head-on and in a business-like manner.

So, as the meeting continued, Kim, along with Finance Secretary Suman Prasad Sharma, grilled officials of various executing and implementing agencies and the ADB as well.

These officials were asked why many projects were sitting on top of funds and not utilising them, why contractors who were awarded contracts failing to make timely deliveries, why approvals were not given on time and why procurement processes were moving ahead slowly.

The meeting also deliberated on whether the problems lay with executing and implementing agencies or the ADB.

This unconventional approach in conducting the meeting, in turn, brought most of the participants on board and made the meeting more participatory. In other words, today’s meeting became a vehicle for spotting out real problems and recommending practical measures to deal with them.

The ADB probably took this approach because a huge chunk of fund pledged by the institution has not been utilised by the government.

The ADB’s ongoing portfolio for Nepal stands at $1.95 billion. But as of June 30, as much as $1.43 billion was yet to be disbursed.

“If we do business as usual, it will take 14 years to disburse $1.43 billion ... So, we are at a critical juncture here and many of the (projects) are at a risk. In this context, it would not be feasible to further increase financial resources for Nepal, although we have intentions of investing in big projects here in the coming days,” Kim told the meeting, indicating, the ADB may cutback loans for Nepal if the performance of ongoing projects does not improve.

Lessons to learn

Kim’s comments were bitter to swallow for many government officials present at the meeting.

But at the same time, the existing laidback attitude of the government is not helping the country and people.

Last fiscal, for instance, the government did not utilise Rs 106.41 billion of the allocated funds, which was enough to build Kathmandu-Tarai fast track.

And this practice of the government sitting on top of a huge chunk of financial resources has continued for years, whereas critical physical infrastructure, such as airports, roads, bridges, that could provide impetus to economic activities, are never built.

So, every ministry should take a leaf from today’s meeting, gather project chief and other officials at least once a month, discuss issues in a business-like manner and make sure the projects meet all the deadlines. In other words, project officials should be made accountable for their acts.

Every ministry has to be blunt on this matter because underspending of allocated funds should not be tolerated anymore, as it is preventing the country from attaining higher trajectory of economic growth and sharing prosperity.

It is even more important to take such unconventional measures this fiscal, which has been declared by the government as ‘Budget Implementation Year’.