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KATHMANDU, March 13:Taxpayers pay the government and it is expected to spend it in developing infrastructure, stimulate the economy, create jobs and provide services to the taxpayers directly or indirectly.
Of course, some amount of inefficiency is expected from governments, what with every spending having to go through different levels of bureaucratic and procedural approval process. But the only ground that the Nepali government seems to be breaking is not roads, power plants or bridges, but how much of the budget remains unspent.
The government has managed to spend just 13 percent or Rs 11 billion of the Rs 85 billion that it allocated for capital expenditures -- that is, spending directed at building, acquiring or upgrading infrastructures that have future benefits to the country -- in the first six months of the current fiscal year.
This indicates that taxpayers are not benefiting and the economy is not in a dynamic position.
Moreover, lack of economic activity in the public sector has also failed to nudge the private sector into spending more. As a result overall economic activity is crawling, which in turn affects job creation and earnings, and then stifles consumption. With less money circling through the economy, money collected through taxes fails to provide the common people with much economic benefit.
The government’s periodic plan documents say that for every rupee of capital spending by the government, the private sector invests Rs 2.
Provided low capital expenditure in the first half of the year, economists are doubtful that the economy will achieve the target of 5.5 percent growth.
This year’s budget broke precedence from those of the past three ones when it was announced in full and on time, and the government at the time was much lauded.
Things will finally get done, economists, the private sector and the general public alike said. But the rising waves of optimism that it created hit the inevitable submerged barriers and giant walls to finally ebb and become trickles flowing through puddles across the many pockmarked and unfinished road projects in the capital and the country.
In addition to the number of usual suspects behind poor implementation, the election for the Constituent Assembly sapped up government employees’ time and attention when many were redeployed for about a month and half to conduct the election.
Economist Posh Raj Pandey pinpoints structural problems as the major issue behind the delay in the approval of programs and the lengthy procurement processes behind the failure to spend the resources stagnating inside the state coffers.
“Statistics say that 60 percent of the government’s actual expenditure happens in the last three months of the fiscal year due to time that programs take to complete the budget approval and contract processes,” Pandey adds.
Economist Bishwambher Pyakuryal said the government’s way of spending in a short term makes the eventual work of poor quality and the expected developmental benefits are lost while the state has to spend again for the same work. An excerpt of the mid-term review report on budget says, “Budget implementation is stuck to the process and procedures, some projects have not yet started. There is no harmonization between available resources and their utilization.”
Add to the pressing and recurrent problems like failure in land acquisition, red tape, local problems, and lack of time-bound action plans of projects.
“Many projects, including transmission line, road and irrigation projects have come across a seemingly common problem of land acquisition in the absence of a strong and timely law to deal with the issue,” adds Nirmal Hari Adhikari, the undersecretary at the Budget Division of the Ministry of Finance (MoF).
An outdated Land Acquisition Act of 1977 still prevails. Locals demand high prices for the land and the state authority ends up not being able to purchase land as the provision allows for paying of the lowest market price or having to negotiate long and hard to acquire the land.
Speaking at a conference on ‘Government’s mega projects’ at MoF last week, Arjun Kumar Karki, the managing director of Nepal Electricity Authority, said the people of Kathmandu would have to live in the dark even when power plants around the country managed to generate enough energy because of failure to acquire land to install transmission lines.
Likewise, political instability, according to high-level officials at MoF, is also behind the slow progress in spending as bureaucrats remain busy trying to draw the attention of political leaders and winning favor instead of doing their designated job.
On the topic of low expenditure, newly appointed Finance Minister Ram Sharan Mahat stresses that a proper method is needed for budget preparation and prioritizing for better spending.
"Budget was allocated for many projects without needful preparations and homework having been done. That was the main reason behind the low spending,” Mahat said, adding that the there is a dearth in resources in some projects whereas others have occupied the budget. He expressed dissatisfaction over allotment of budget before preparing programs and described the prioritizing of projects as baseless and without any parameters.
Nineteen national-pride projects also paint a bleak picture in terms of their expenditure status. The mid-term review says, “The projects have only occupied the resources as the implementation is almost ineffective.”
BUDGET PREPARATION
The past experience says that a well-prepared budget can lead to better implementation, but officials at MoF lament that budget preparation by ministries is taken for granted.
An official at MoF, asking not to be named, said ministry officials are not serious and they merely count the amount in the budget and forward the program without enough preparation. Moreover, a recent heavy demand for non-budgetary programs and projects by ministries shows that they have paid little attention to implementing their budgets. In the first six months of the current fiscal year, ministries asked MoF for over Rs 10 billion to spend on fresh programs and projects, almost equal to amount of capital expenditure they have been able to spend over the period.
WAY FORWARD
There is a common view that there is urgency for fresh policy, laws, and a working modality for improving capital expenditure.
There is a need for an overhaul of the procurement law and for other necessary provisions to shorten processes that programs have to pass through before implementation as well as effective expenditure monitoring.
Economist Pyakuryal says that there must be varying provisions for contracts depending on the types of projects, amount and programs instead of the existing blanket approach.
“The laws no longer should be about awarding to the lowest bidder regardless of the contractors’ track record and any compromise in quality of the work should be clearly defined as corruption,” Pyakurel adds.
The mid-term report recommended bringing a ‘project implementation law’ to solve several problems in implementing projects, including making implementation officials and the people accountable.
It is essential to prepare time-bound plans for a project along with cost-effective and quality assurance measures. Undersecretary Adhikari stressed the need for projects to have an specific annual work plans which prioritize activities in the field-level.
The report also said that there must be result-oriented work performance review system for project chief and staff as well as setting of dates of completion.
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