The National Planning Commission (NPC) is drawing up a Three-Year Plan tailored to the development needs of the transition period. It is receiving inputs from the political parties that make up the interim government (IG), as well as from various other quarters. Every constituent of the IG will naturally seek to have its priorities incorporated into the Interim Plan. It is also urgent to set about the task of reconstruction and rehabilitation of damaged or destroyed infrastructure. To devote attention fully to this, a new ministry has been created to funnel, via one door, all efforts to that end. This huge task will demand more resources. There does not seem to be the dearth of donors ready to provide aid. Several have already made substantial commitments. But NPC vice chairman Dr Jagadish Chandra Pokharel has warned of an interruption in the aid flow unless the government boosts its capacity to spend.

This is a paradox, though it has existed throughout the 56-year-old history of Nepal’s planned development. In the past, too, one of the many criticisms the government faced was its low capacity to spend even the available money on development. Dr Pokharel disclosed the other day that for the next two years the government needs an additional $.2.06 billion to meet the objectives of the Interim Plan. He added that though donors have been approached, their standard reply has been, “When you cannot spend the available funds, why do you need more?” On their part, the donors seem right. While current expenditure is often revised upwards at year-end, capital expenditure suffers from under-utilisation. Moreover, a large chunk of the capital budget is hurriedly spent towards the close of the fiscal year with the intention of preventing the budget from lapsing. This often leads to unwise use of funds, to say the least.

For the coming year, the government is reported to be working on a considerably enlarged national budget, estimated to hover at around Rs. 159 billion, thanks to the needs of rehabilitation and reconstruction and a new focus on agriculture. Dependence on foreign aid will reportedly account for Rs. 42 billion. It is necessary to expand aid absorptive capacity, as Dr Pokharel emphasised. But this must not come at the expense of proper and efficient utilisation of resources. There is an equal need, therefore, to ensure that waste and corruption, which still, on general reckoning, account for a sizable chunk of the expenditure of development budget, must be minimised. No government has come up with a concrete plan for this. Otherwise, mere spending does not add up to commensurate development. It could even have worse negative effects. As for the Interim Plan’s proposed annual growth rate of 5.5, it looks, based on the current economic indicators, a shade too ambitious given the fact that the government has downscaled the current year’s growth rate projection to 3.8 per cent (from the original estimate of 5 per cent), and that the ADB’s recent annual growth rate estimate for Nepal for the next two years stands at 2.8 per cent.