Nepal | August 07, 2020

Editorial: Dismal spending

The Himalayan Times
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Failure to spend capital expenditure will mean no economic growth and no new job creation in the country 

No private sector can match the government when it comes to generating employment opportunities if the latter is able to spend its capital expenditure allocated in the fiscal budget. The government can indirectly create tens of thousands of jobs within the country by awarding development contracts to the private sector. The more capital expenditure the government can spend, the more employment opportunities it will create, bringing about a positive impact on the national economy. Every year the government allocates billions of rupees in development projects to improve the living condition of the people and also to stimulate economic activities. However, it has never been able to fully utilise its hard-earned resources for overall development, thanks largely to the poor state mechanism, lackluster bureaucracy and lengthy bidding processes that consume most of the time. Effectively, the government can best utilise seven months of the year in development works as the initial five months are spent in passing the fiscal budget and concluding the bidding processes of the approved projects. Nothing has changed even though the new constitution has made it mandatory to table the fiscal budget in the Parliament on May 28 every year, two-and-a-half months ahead of the new fiscal. This provision was inserted in the constitution to expedite capital expenditure from the beginning of every fiscal. But such a provision has also failed to to yield the desired results.

Against this backdrop, the Financial Comptroller General Office (FCGO) has stated the government has managed to spend a mere 4.34 per cent, or Rs 17.7 billion, out of the Rs 408 billion allocated for capital expenditure, during the first quarter – till mid-October – of the current fiscal. Overall government expenditure stood at 11.04 per cent out of the Rs 1.53 trillion in the same period. It means more money was spent on financing and recurrent expenditure, which do not generate new employment opportunities in the country. Last year, the government could spend only 75 per cent of the allocated development budget. Finance Minister Yuba Raj Khatiwada begged an excuse for not being able to spend the capital expenditure last fiscal as the government was busy in drafting the necessary regulatory frameworks. He has now vowed to speed up the capital expenditure in the current fiscal year.

Lack of proper planning from the initial months, delay in finalising the bidding process and absence of proper monitoring of the approved projects by the centre at the sites are the major reasons for the failure to spend the capital budget. Some of the multi-year contacts, such as airports, hydropower plants and highways that do not face a budget crunch, are also delayed as there is no effective mechanism to monitor them and take legal action against the concerned government officials and contractors for their protraction.There is also a tendency of spending a a major chunk of the budget towards the end of the fiscal year, resulting in poor quality of development works. This tendency will remain unresolved unless the government improves the capacity of the bureaucrats, technocrats and contractors, all of whom are the driving force for carrying out the government works. A proper budget execution plan is a must to increase the government’s spending capacity.

Coming up roses

Dashain is over, and Tihar, the festival of lights and flowers, is just round the corner. It’s a festival when Nepalis decorate their homes with marigold flowers and oil-fed lamps to welcome Laxmi, the Goddess of Wealth. Until recently, Nepal was heavily dependent on the southern neighbour, India, for the bulk of the demand for marigold and other flowers.

However, this year, imports are likely to be just about 7 per cent, as Nepal gradually becomes self-sufficient in flowers. Flowers are commercially grown on 157 hectares of land in 41 districts, and production has been growing 10-15 per cent annually.

With floriculture expanding across the country, there is tremendous potential for export. But it is a delicate commodity that needs to be handled with care, which means the necessary logistics must be put in place before it can be a meaningful export item, although small quantities of flowers are already being exported. One such requirement is direct flights to destinations, so that flowers can reach there fresh, ready to be sold immediately. There is a big demand for roses, chrysanthemums, carnations and tulips at any time of the year in the developed world.

A version of this article appears in print on October 16, 2019 of The Himalayan Times.

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