The downbeat projection comes a year after capital expenditure as percentage of GDP stood at 3.3 percent-a year when the annual budget was launched on time.
A year before that total capital expenditure stood at 6.5 percent of the GDP.[break]
Capital expenditure will remain lower this year because of delay in launching a full budget, says the ADB´s latest Macroeconomic Update. Other reasons cited for low capital spending are: delay in submission of budget release request for majority projects, approval of annual expenditure programs, procurement process, payment for completed works and submitting accounting records.
“For a developing country with tremendous need to scale up infrastructure investments to tackle head-on the binding constraints to accelerated economic activities, reduced as well as underspent capital budget is a cause of concern,” the report says. “Scaling up both quantum and quality of capital spending is vital to creating the foundations for the lackluster growth to take off on sustainable path.”
The multilateral donor agency´s pessimistic prediction comes at a time when the Ministry of Finance has boasted spending over 90 percent of the capital budget this fiscal year citing “capital spending plan was made on actual need basis of projects”.
The government, through full budget announced on April 9, has allocated Rs 66.1 billion for capital spending for this fiscal year. The amount allocated for capital spending this fiscal year is only 16.3 percent of the total budget, as against 18.9 percent in the last fiscal year and 38.3% a year before that.
“Unfortunately, on top of low capital budget this fiscal year, expenditure has failed to pick up thus far,” the ADB report says.
The government spent only Rs 7.7 billion of the total amount allocated for capital spending in the first six months of the current fiscal year. Capital spending stood at Rs 9.6 billion in the same period last fiscal year and Rs 41.8 billion in the first six months of in 2010/11.
“According to the line-wise budget headings for this fiscal year, capital expenditure consists of expenditure for the acquisition of fixed assets, including land acquisition, purchase and construction of building, furniture and fixtures, vehicles, machinery, public construction, capital improvement, and research and consultancy related to capital,” the ADB report says.
“Compared to the level of expenditure in the first six months of last fiscal year, expenditure in all of these headings except for capital formation, and research and consultancy declined in the corresponding period this fiscal year.
“Even more worrisome is the indication that expenditure under public construction (roads, bridges, airports and other productive assets)--which registered a negative growth of 16.6 percent in the first half of this fiscal year--is not going to pick up as expected.”
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