Capital expenditure remains meagre 4.7% in first three months of new fiscal

Kathmandu, Oct. 20: Spending of the budget allocated to development projects (capital expenditure) in the first trimester of the current Fiscal Year 2025/26 has remained the lowest in the last four years. 

According to the Financial Comptroller General Office (FCGO), capital expenditure has staggered at 4.7 per cent (Rs. 19 billion) of the total allocation of Rs. 407.88 billion only to outperform 3.9 per cent of 2021/22. Then, the government could spend Rs. 14.8 billion against the total capital allocation of Rs. 378.09 billion. 

Then, the country’s economy was struggling to be back on track after the second lockdown imposed in the last trimester of the previous year. 

This year, the Gen G protests, vandalism and attack on business and economic establishments has shattered the confidence of the private sector while the damage at the government offices and infrastructures has resulted in procedural delay in the execution of the development projects. 

Although poor budget execution during the first half (mid-July to mid-January) has historically remained poor, ministries and other government agencies have found a new excuse in the recent Gen Z protests. 

Development expenditure in the same period in the last FY 2024/25 was 8.36 per cent (above Rs. 29 billion). It was 7.2 per cent and 5.17 in 2023/24 and 2022/23, respectively.

Meanwhile, total budget utilisation in the first three months of this year has reached 18.56 per cent with spending of Rs. 364.6 billion from the annual budget of Rs. 1964.11 billion.

Then Finance Minister Bishnu Prasad Paudel had earmarked Rs. 1180.9 billion for recurrent expenditure and Rs. 375.2 billion for financing which has registered the highest performance with 23.61 per cent fund utilisation. Financing budget is used to repay the principal and interest of loans obtained by the country and government-made investment in commercial ventures. 

Recurrent expenditure stands at 21.75 per cent (Rs. 256.8 billion). In the past several years, recurrent expenditure remained between 19-22 per cent. 

However, the revenue collection has remained satisfactory with 16.51 per cent achievement in the first trimester. Of the annual target of Rs. 1533.44 billion, the government has collected Rs. 253.18 billion.  

The Ministry of Finance informed on Saturday that the target for the first three months of the year was Rs. 321.53 billion. In the last two years, the revenue collection was about 17.3 per cent of the annual target. 

Meanwhile, the federal and provincial governments are scrapping the projects of less priority and that are announced without confirming the financial source. Provinces are also reducing the size of development budget by at least 20 per cent. Finance Minister Rameshore Prasad Khanal had already directed all ministries and government agencies to apply austerity measures and apply frugality in spending. 

The government is in a pressure to manage funds for the reconstruction and restoration of the buildings and infrastructures damaged during the Gen Z protests in early September this year.