Capital spending at Rs 7b in H1

KATHMANDU, Jan 25: Development activities led by the government, such as construction of infrastructure projects, are moving ahead at a painfully slow pace, as most of the ministries have failed to utilize budget allocated for capital expenditure.



The government´s capital spending stood at Rs 7.04 billion, or 13.71 percent of the amount separated for capital expenditure, in the first half of the current fiscal year, despite recent instruction by the Ministry of Finance (MoF) to make use of at least 25 percent of the annual capital expenditure target within six-month period to mid-January. [break]



Such poor result comes at a time when the government has set aside a miniscule amount of Rs 51.34 billion for this fiscal year´s capital expenditure - around Rs 24 billion less than last fiscal year´s allocation.



The government could not allocate more funds for capital spending this fiscal year because it failed to come up with a complete set of budget. So, as a stopgap measure it was forced to set the target based on actual spending of last fiscal year.



“This has affected development works,” said an MoF statement issued on Friday. Apart from affecting development initiatives, low capital expenditure is also expected to put a strain on job creation process and the economy this fiscal year.



“We have continuously been talking with different stakeholders and ministries to ramp up capital spending so that economic activities do not slow down. Yet we have not been able to achieve desired results,” said the MoF statement.



One of the main reasons for low capital expenditure this year is reduction in allocation of funds. Many ministries have been allocated funds less than last year´s actual spending, because of allotment of funds for election and other purposes. On top of this, ministries have been asked to chart out capital spending plans after separating enough funds for salary and other recurrent expenditure.



“Despite bleak capital spending outlook, other economic indicators look sound,” said the MoF statement.



The government, for instance, was able to collect revenue of Rs 134.56 billion in the six-month period, up 21.2 percent from same period of last fiscal year.



“The foreign exchange reserve is also in a comfortable position and can finance imports for a period of up to 8.6 months,” said the statement. “Besides, the liquidity is also in a comfortable level of Rs 20 billion.”

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