Government plans to increase capital spending next fiscal

Kathmandu, March 11

In the next fiscal year 2017-18, the government’s development budget is expected to hover around Rs 330.64 billion, which is almost a three-fold increase of the capital budget of 2014-15 (before devastating earthquake of April 25, 2015).

In the aftermath of the earthquake, the size of the development expenditure was raised to carry out post-quake reconstruction works. However, capital expenditure remains dismally low despite the increase in the allocation. To cope with this challenge, the government is preparing to take some measures so that the allocated budget can be fully utilised.

The Ministry of Finance (MoF) has asked other ministries to submit proposals for only those projects that can be implemented.

“The government will allocate resources based on the preparedness of the projects,” said Madhu Kumar Marasini, chief of the Budge Division under MoF. “Allocated resources can be effectively utilised if the projects are well prepared or ready to be implemented.”

MoF will also allocate certain resources to the ministries that carry out development related works to prepare project bank. Some ministries like the Ministry of Physical Infrastructure and Transport, Ministry of Urban Development, Ministry of Energy, Ministry of Culture, Tourism and Civil Aviation, Ministry of Federal Affairs and Local Development, and Ministry of Irrigation, among others will get budget for feasibility study, land compensation, right of way clearance, detailed project report preparation and other ground works that are required for project implementation.

On the other hand, all the ministries have been told to prepare bidding documents once the projects proposed by them are approved by the National Planning Commission (NPC) and MoF during the budget formulation process.

Project chiefs have been strictly instructed that the main contractor must be present during field-level works even though the main contractor can hire sub-contractors to carry out parallel works.

As per MoF officials, 50 per cent of capital budget must be spent in the first two quadrimesters from next fiscal. Most importantly, the MoF is going to shorten the procedural steps for approval of central-level projects.

As per the existing provision, projects need to be reapproved by NPC after the budget is approved from the Parliament. On the basis of Financial Procedure Rules 2007, NPC has been approving central-level projects before they are implemented. As the Line Ministry Budget Information System (LMBIS) is in place, all projects included in this system are already approved by NPC and MoF and there is no rationale behind reapproving the programmes, as per Marasini.

“The fiscal budget 2017-18 will include a provision in the Appropriation Bill of next fiscal stating programmes and procurement plans of central projects that have been green-lighted through LMBIS would not have to be approved again,” he informed.

Though the size of the development budget increased, the government was able to spend only 79 per cent of the total allocation in fiscal 2014-15 as the earthquake adversely affected development works though the budget was presented on time. Disruptions in supply lines also hit development expenditure in the last fiscal and only 59 per cent of the total Rs 208.88 billion was spent in fiscal 2015-16. In the current fiscal, due to slow expenditure since the beginning, the government has revised capital expenditure target to 84 per cent or Rs 262 billion out of the total allocation of Rs 311.95 billion.