Clearance of payment backlog improves budget performance

Kathmandu, Sept. 6: Mobilisation of development budget has achieved an exponential growth in the current Fiscal Year 2024/25 against the previous year as the progress reached 3.52 per cent of the total allocation of Rs. 352.35 billion in the first 50 days of the year. 

In FY 2023/24, there was 1.81 per cent mobilisation of the total allocation of Rs. 302.07 billion, according to the statistics of the Financial Comptroller General Office (FCGO). 

According to the Ministry of Finance (MoF), this growth is backed by the early payment of the backlog accounts of various development projects. Although the details of the payments are not available as of Thursday, the Ministry maintained that the improved performance of the budget this year is also the result of improved execution and planning. 

"The MoF has facilitated in paying the dues of the contractors. It has not only improved the budget performance, but also increased liquidity in the market," said Mahesh Bhattarai, Joint Secretary and Chief of Planning, Monitoring and Evaluation Division at the MoF. The Finance Ministry is in a mood to clear all possible backlogs that are valid. 

He added that the government has been trying to make a policy departure, although it is gradual, by shunning the projects with poor preparedness and implementing reforms at the key capital projects. 

Despite finance minister's multiple efforts, both revenue collection and expenditures remained sluggish and the government failed to achieve its annual targets for the past several years. Deputy Prime Minister and Finance Minister, Bishnu Prasad Paudel has also initiated dialogues and engagements with the key development ministries including the Ministry of Physical Infrastructure and Transport, Ministry of Urban Development, Ministry of Energy, Water Resources and Irrigation and Ministry of Agriculture and Livestock Development. 

Meanwhile, Bhattarai said that the MoF has been coordinating with the development ministries to make maximum utilisation of the development budget.

The statistics published by the FCGO have also shown an interesting and gradual progress of the utilisation of the capital budget with the progress almost doubling in the first 50 days of the past four years. 

In 2021/22, the government could spend only 0.47 per cent of the total capital allocation Rs. 378.09 billion and the performance improved to 0.93 per cent in the same period in the following year which jumped to 1.81 per cent last year. 

However, although the performance has significantly improved this year compared to previous five years, this is not satisfactory as it would still be below the quarterly target. 

Although the first quarter of the year mainly involves the activities related to project updates and budget disbursement, there should be more than 10 per cent progress in budget mobilisation, according to the MoF. 

Meanwhile, the government has mobilised 4.95 per cent (Rs. 92.01 billion) of the total annual outlay of Rs. 1860.30 billion. The budget of 2024/25 has earmarked Rs. 1140.66 billion for recurrent and Rs. 367.28 billion for financing. 

Financing, which is used to pay the principal and interest of the loan obtained by the government, has seen the highest progress of 9.98 per cent with the total disbursement of Rs. 36.67 billion so far. Similarly, recurrent expenditure has achieved 3.76 per cent (Rs. 42.94 billion) progress.

Likewise, there has been a progress this year in terms of revenue mobilisation as well. The government has collected 9.2 per cent of the annual revenue target Rs. 1419.30 billion while in 2023/24, progress was at 7.62 per cent of Rs. 1422.54 billion. Last year, revenue collection and capital expenditure remained poor. Total revenue collection was about 71.76 per cent of the annual target while the mobilisation of the capital budget was one of the lowest at 63.47 per cent.