Boost Capital Spending

Despite many political movements, Nepal has been unable to bring about transformative changes to the lives of people. Every political change reflects the people's desire for dignity and prosperity. But there is a yawning gap between the public aspirations and economic reality. Political promises are not translated into tangible benefits to the people. This is a hard fact that has existed for decades. The structural barriers often hinder the desired level of economic transformations. There are several factors at the macro- and micro-level, stalling the pace of economic development. They involve political, technical and bureaucratic elements. Systemic flaws always cause delays in executing the development projects. The lion’s share of the budget is spent on the recurrent expenditures and financial management. Ironically, an insufficient amount of budget allocated to capital spending is not fully spent.

The trend of capital spending is also not up to the mark in the current fiscal year 2025/26. During the past nine months, only 24.15 per cent of development was spent. According to a news report in this daily, just Rs. 98.51 billion of the Rs. 407.88 billion under capital spending has been mobilised so far. The remaining budget must be spent in less than three months. The previous government unveiled Rs. 1964.11 billion budget for the current fiscal year. In the past six years, capital spending in the first nine months remained at or below 30 per cent, with just one exception. Failure to spend the development budget has prevented the country from achieving the targeted economic growth rate. Experts point out the effective administrative and procedural reform to enhance capital spending. 

Frequent changes of governments have been attributed to the slow execution of development projects. Now the country has stable and strong government, and it needs to fix problems that hit development works. Focus must be on building the capacity of the government agencies to complete the projects in time. There has been a tendency not to carry out preparation works properly. For instance, a considerable amount of time is consumed in acquiring land and conducting environmental impact assessments. Our procurement law gives priority to the lowest bidders. As a result, efficiency and quality are compromised. Centralised decision-making process, rent-seeking attitude and weak monitoring lead to the inordinate delay in the project execution. The nefarious nexus between politicians, bureaucrats and contractors is also blamed for the delayed allocation of the budget.  

Similarly, the government needs to allocate funds to the prioritised projects and not to scatter the budget on many projects that do not yield tangible results. Another discrepancy is seen hasty spending of budget towards the end of the fiscal year. This is notoriously known as 'asare bikas' in which resources are executed in the eleventh hour frantically, without focusing on quality and durability of the projects. The new government under Balendra Shah has taken a series of initiatives to ensure good governance and enhance inclusive growth. The Rastriya Swatantra Party (RSP) has envisioned creating "$100 billion economy" with digital transformation and infrastructure-led growth. It has set ambitious goals of attaining 7 per cent annual growth, 1.2 million jobs and 15,000 MW electricity. These goals can be attained only when the development budget is spent as estimated. The government is expected to end the bottlenecks that create obstacles to the capital spending.