The budget blues: Nepal’s weak investing capacity

It’s that period of the year again when the authorities scramble to invest its budget before the next budget is implemented. Local journalists have given this yearly phenomenon an apt moniker of “Asare Bikas”, implying the month of Asar in the Nepali calendar when the government flounders to invest its budget.

One can simply discern the kind of substandard and haphazard growth that such a strategy towards implementing the fiscal policy of the nation delivers. This perennial training also exacerbates the loanable fund’s crisis or the liquidity crunch that banks face every year due to the sluggish pace of investing on the part of the government.

This, consequently, has an unfavorable impact on interest rates and the monetary policy that vacillate wildly, as banks and financial institutions use this as a comfortable excuse to pump up interest rates to the peril of the average citizens and the bigger economy.

The funds for the year 2018-19 was to the tune of Rs 1 .31 trillion, or USD 11 .6 billion, an unprecedented amount for Nepal. The budget this size naturally raised expectations among the Nepali people, provided the fact that the house is controlled by a stable majority government. But anticipation came crashing down with the Financial Comptroller’s state on the government’s performance.

Based on the Financial Comptroller General Office, the government continues to be able to spend only 38% of the Rs 313 .99 billion, or USD 2 .7 billion, the total capital expenditure allocated for the fiscal year 2018-2019. This means the authorities were not able to spend a whopping 62% of the capital budget, which is 23 .96% of the total funds for the year. This is a dismal performance, to say the least on the government’s part.

Comparison of the government’s capital investment this year to the past fiscal years more shows how cringe-worthy the government’s performance continues to be this time. Capital expenditure in the year 2015- 16 amounted to 59% of the total allocation while it was 66% of the total allocation in 2016-17. In 2017-18, the capex was 79 .74% of the overall allocation.

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