Underperformance prevails at federal, provincial levels

Kathmandu, Mar. 8: As the seventh month of the current Fiscal Year 2024/25 is about to conclude, mobilisation of capital budget of the federal government has remained pathetic with just 22.08 per cent utilisation. 

This means, from the capital allocation of Rs. 352.35 billion, only Rs. 77.79 billion is spent from mid-July 2024 to March 6, 2025, according to the statistics published by the Financial Comptroller General Office (FCGO). 

During the same period in the last FY 2023/24, there was a progress of 24.59 per cent in terms of capital expenditure. However, the size of the budget was lower than that of this year with Rs. 302.07 billion allocation, and mobilisation of Rs. 74.27 billion. 

Capital expenditure is crucial for medium-term and long-term development projects, but the country is witnessing a significant underperformance both in terms of allocation and utilisation of funds for capital projects.

However, the Ministry of Finance (MoF) maintained that the combined utilistion of capital budget by the three levels of government could improve the scenario while a portion of the recurrent budget is also allocated for capital works like repair and maintenance of the development projects such as road, water supply, irrigation and other infrastructures.

However, the mid-term review of the provincial budget has shown that their performance was not better than the federal budget. 

For example, in the first half of the current fiscal, Bagmati province could spend only 14 per cent of its total capital allocation while Karnali province's progress stood at 15 per cent. 

The MoF has mentioned in its various reports that the scattered allocation of resources to numerous small projects, allocation inefficiency without strategic focus, lack of clear project objectives, and implementation challenges have been causing a detrimental impact on the utilisation of the development budget. 

The FCGO report also reveals a concerning trend in capital expenditure, suggesting potential bottlenecks in project implementation, due to administrative delays, lack of coordination, or insufficient project readiness, as Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has been reiterating at various occasions. 

Meanwhile, the recurrent expenditure which covers day-to-day operational costs of the government is relatively higher at Rs. 565.57 billion, achieving 49.58 per cent of the annual target. Last year, recurrent expenses during the same period stood at Rs. 561.04 billion (49.15 per cent). 

Quite surprisingly, the financing expenditure, which includes debt servicing and other financial obligations of the government, has achieved 46.97 per cent progress. 

The financing management stands at Rs. 172.52 billion. Total allocation for this sector was higher than the capital budget - Rs. 367.28 billion. In FY 2023/24, financing management had achieved the progress of 40.68 per cent by utilising Rs. 125.06 billion of the Rs. 307.45 billion allocation. 

On the contrary, revenue collection in seven months has improved compared to the previous year. 

As the FCGO data shows, revenue collection by March 6 this year stands at Rs. 712.7 billion which is 48.43 per cent of the annual target of Rs. 1471.62 billion. 

Last year, revenue equivalent of Rs. 636.13 was collected. This was 43.2 per cent of the annual target of Rs. 1472.48 billion. Progress in tax revenue collection is 47.83 per cent while non-tax revenue collection has reached 59.33 per cent of the annual target this year. 

Rs. 80 billion is collected in non-tax revenue against the target of Rs. 135.09 billion. 

However, management of grants from foreign development partners and financial institutions has not been satisfactory with just 5.52 per cent progress. The government, in its budget for FY 2024/25, had announced to secure Rs. 49.94 billion in grants but so far only Rs. 2.75 billion could be managed.