KATHMANDU, Nov 28: A study has revealed that it is difficult to increase the capital expenditure in Nepal without policy and institutional reforms. The government’s inability to spend the allocated budget has slowed down the construction sector, directly impacting the economy.
According to a joint study conducted by the Confederation of Nepalese Industries (CNI) and the Society of Economic Journalists-Nepal (SEJON) on the quarterly status of budget implementation for the current fiscal year, the failure to implement reform programs introduced through the allocated budget has resulted in unspent funds, adversely affecting the infrastructure development sector.
The study has pointed out that the budget allocated for the infrastructure sector has not been implemented due to various reasons, including the implementation of plans without prior preparations, the current government not taking ownership of the budget introduced by previous government, and the failure to implement the reform programs outlined in the budget.
At a program organized by the CNI last week in Lalitpur to discuss the status of budget implementation in the infrastructure sector, the National Planning Commission (NPC) highlighted that the 16th Five-Year Plan calls for an annual investment of Rs 2 trillion in infrastructure. However, only around Rs 300 billion is allocated annually for the sector, and even that remains largely unspent. In recent fiscal years, only around 60 percent of the allocated budget has been efficiently utilized.
The study reveals that of the seven infrastructure-related points included in the CNI’s Budget Watch booklet for the fiscal year 2023/24, only one has been implemented with delays during the first quarter. Four points show partial progress, while two have reported no progress at all.
Failing to spend
At the program, NPC Vice-Chairman Prof Dr Shiva Raj Adhikari stated that discussions are underway with all ministries to identify ways to reduce obstacles and enhance coordination to increase the capital expenditure. "We are working to reduce unnecessary and cumbersome procedures, resolve forest-related issues, and streamline procurement and financial management," he said.
Adhikari stated that preparing a list of budgeted projects by Chaitra (mid-March to mid-April), finalizing plans and resources in advance, and implementing them strictly are expected to yield better results. He added that the government is focusing more on completing the ongoing projects rather than introducing new ones.
Sushil Gyewali, the chief executive officer (CEO) of the Investment Board Nepal, stated that the 16th Five-Year Plan has projected a requirement of Rs 11.2 trillion in investments in the infrastructure sector. There is a plan that out of this amount, Rs 3.5 trillion will be invested by the government, and the remaining from the private sector.
He further said, "If clear action plans and responsibilities are assigned among all levels of government under the federal system, it could help address the challenges in the infrastructure sector. The lack of clarity has led to confusion and hindered the expected progress in infrastructure development."
He mentioned that if the five-year plan is to be implemented over the next five years and made legally mandatory, there will be no scope for adding new projects. CEO Gyewali claimed that the government is working on institutional reforms.
He mentioned that the Investment Board has been giving special attention to coordinating efforts to achieve the expected progress from projects and remove obstacles.
Krishna Panta, an undersecretary at the Ministry of Physical Infrastructure and Transport, stated that there are issues in the implementation of infrastructure projects due to the distribution of projects and fragmented plans, resulting in inadequate budgets. He provided an example where lawmakers try to allocate just 10 million rupees for projects costing Rs 250 million, which leads to no work being done. He also mentioned that the slow pace of capital expenditure is due to the inability to advance steps taken for improving public procurement.
During the program, CNI President Rajesh Kumar Agrawal stated that infrastructure development is a must to revitalize the economy. "The stagnation of the economy is due to the inactivity of the infrastructure sector," he said.
He urged the government to make necessary arrangements to ensure that the allocated budget is spent each year. During the program, Sujan Oli, president of SEJON, made a presentation on the implementation status of the infrastructure budget.
CNI Vice President Birendra Raj Pandey stated that the investment conference is focused on advancing policy and implementation trends to improve the infrastructure sector.
