Even many of his subordinates at the Ministry of Finance doubt such a goal is achievable, since the full budget was launched after eight months into the current fiscal year and only around 25 percent of the 51.34 billion allocated for capital expenditure was spent in the eight-month period. [break]
High-ranking officials at other key government agencies and a few donor agencies that Republica talked to also held similar reservations.
Yet, they could not outright refute what the finance secretary said, a sign many are optimistic about this year´s higher capital spending -- money spent on development activities like building of roads, irrigation projects and hydropower plants that have the ability to create hundreds of thousands of jobs.
One reason for this muted optimism is an instruction issued by the Ministry of Finance to all ministries telling them to apply for final approval of Priority One projects at the National Planning Commission (NPC) within seven days of receiving the authority to implement them.
The NPC, a top-level advisory body responsible for formulation of the country´s development plans and policies, has pledged to extend final approval for implementation of such projects within three working days.
The finance ministry has also directed all ministries to immediately implement Priority Two and Priority Three projects on their own as they do not require NPC´s approval for implementation.
“These instructions have certainly raised hopes that things would move on the fast track this year,” a high-ranking NPC official told Republica on the condition of anonymity. “But given the poor track record of many ministries, there is no guarantee that the finance ministry´s instructions would be heeded and capital spending would rise.”
Earlier, the Asian Development Bank (ADB) had publicly stated that the Nepali government takes over two years to award 25 percent of the contracts and an additional two years to disburse 10 percent of the funds allocated for the projects.
This compares with ADB´s “ideal” standard of 100 percent contract awards and 20 percent disbursement of funds within the first year of project approval.
The finance ministry acknowledges this weakness. “But since no new program has been introduced this year, it won´t happen this time,” Lok Darshan Regmi, the chief of finance ministry´s budget division, told Republica.
A glance through the Red Book, or estimates of expenditures, posted on the ministry´s website on Thursday, however, shows inclusion of at least 18 new projects for this fiscal year. Most of these include donor-funded programs ranging from forestry and fish-farming to the Sitapaila-Dharke Road, the Ring Road expansion in the Kathmandu Valley and town development, according to the finance ministry.
“Yes, these projects look new but the work on them started during the Babu Ram Bhattarai-led government´s tenure, as the previous government, which was barred from introducing new projects, was not restricted from implementing new donor-funded projects,” Regmi said. “Because work has already started on these projects, we do not have to deal with procurement-related processes, like tender document preparation, at this point of time, which is time consuming.”
On top of that, the capital expenditure figure that was announced through full budget last Tuesday was derived after consulting various ministries and based on their actual ability to utilize funds, Finance Secretary Santa Raj Subedi told Republica on Thursday.
“So capital spending will be higher this year than last fiscal year´s (Rs 51.39 billion or 71 percent of the total budget allocated for capital expenditure),” Subedi said, defending the comment made on Wednesday. “What I said was based on reality.”
The government has allocated Rs 66.13 billion, or 16.34 percent of the total budget of Rs 404.82 billion, for capital expenditure this fiscal year. This figure is higher by Rs 14.79 billion than the capital expenditure of Rs 51.34 billion appropriated by the Bhattarai-led government.
Of this amount allocated for capital spending this year, 88.03 percent is allocated for Priority One programs, which includes the likes of Rani Jamara Kularia, Sikta, Babai and Mahakali irrigation projects; the Kathmandu Valley Urban Road Project; postal highways; Mid-hills Highway; Road Sector Development Project and Ring Road Improvement Project.
“Since these projects have been making use of funds in an impressive manner, we strongly believe more than 90 percent of the funds allocated for capital spending would be used this year,” Regmi said.
No ceiling on capital spending in final quarter
The Ministry of Finance has tweaked the capital spending provisions for this fiscal year by removing the ceiling that barred ministries from spending more than 40 percent of the budget allocated for capital expenditure in the final three months of a fiscal year.
“This year, ministries can spend whatever amount of money allotted under capital expenditure even in the final quarter of the year (ending mid-July),” Lok Darshan Regmi, chief of finance ministry´s budget division, told Republica. “This was done as it was not practical to keep that ceiling, considering the announcement of the budget eight months into the fiscal year.”
The government earlier barred ministries from spending more than 40 percent of budget allocated for capital expending in the final quarter to encourage projects to make use of the money in the initial months of the fiscal year. “We hope this provision will also help boost capital spending this year,” Regmi said.
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