Public capital expenditure, crucial for economic growth, is consistently underutilized in Nepal. Despite repeated pledges to increase capital expenditure by the government, this year is set to be no different than previous years in terms of meeting capital expenditure targets. The data released by the Financial Comptroller General Office (FCGO) shows that the government spent only Rs 56.93 billion for development projects in the first half of the current Fiscal Year (FY) 2024/25. This constitutes a meagre 16.16 percent of the total target. The dismal capital expenditure has been a perennial problem almost every year. In the FY 2023/24, the government spent around 61 percent of the allocated amount of Rs 302 billion for the entire year. Of the amount spent, Rs 50 billion was exhausted just in the last one month, raising questions about the effective utilization of the budget allocated for the development expenditure. The failure to spend capital expenditure in a timely and appropriate manner is a serious issue that warrants immediate attention of our politicians and policy makers.
The government had set a target to spend a total of Rs 352.35 billion in capital expenditure. But the fact that the government is able to make not even one quarter of the total budget means that there have not been any development activities— key to give dynamism to the national economy—in the country. The low capital expenditure is having a profound impact on the economy. Construction and infrastructure projects play a key role in boosting the economy and creating employment. However, in the current situation, the immobility of the construction sector, delays in payment to contractors and procedural complications have created obstacles in these projects. Since the government is unable to make capital expenditure on time, financial management has also become a challenge. Data shows that only Rs 312.8 million have been spent on an average out of Rs 965.3 million meant to be spent daily. If this situation persists, the long-term development projects are likely to be adversely affected. The government should collaborate with the construction industry to streamline the payment process, remove procedural complications and address problems such as labor shortage in order to make the capital expenditure effective. Only through such reforms will the path be paved to ensure capital expenditure according to the targets and make the economy dynamic.
A Disappointing Picture of Capital Expenditure
Notably, the FCGO data show that the government has fallen short in both capital expenditure and overall government spending. The government had set a target to spend Rs 1.860 trillion throughout the year. But, within half a year, only an expenditure equivalent to Rs 667.60 billion has been spent. This is only 35.89 percent of the total target set for the current fiscal year. As of now, the government has been able to spend 39.63 percent of the Rs 1.140 trillion budgets allocated for recurrent expenditure in the current FY. All these data do not give a positive outlook to our economy. It is sad to note that our country routinely struggles to spend even two-thirds of its allocated capital budget, with most spending rushed in the final months of the FY, despite the need for investment in infrastructure to stimulate the economy and create jobs. This pattern leads to concerns about project quality and hinders long-term development. Factors like bureaucratic delays, frequent staff transfers and weaknesses in financial oversight are attributed to this perennial problem. It is high time our politicians and policy makers prioritized increasing and effectively utilizing its capital expenditure by addressing bureaucratic hurdles, improving financial discipline and ensuring funds are directed towards projects that yield tangible benefits to achieve sustainable economic growth.
