Capital expenditure v social welfare

Modern governments have a primary duty and obligation of providing social protection to their citizens.  Governments around the globe make budgetary allocations for this purpose every year. 

There is a huge gap across regions and countries with respect to budgetary allocations and coverage of population. Europe has the highest level of social security expenditure (nearly 25  percent of its GDP), followed by 21 percent in OECD, 16.6 percent in North America, seven percent in the Asia-Pacific and 4.3 percent in Africa. In sub-Saharan Africa and South Asia, social security coverage ranges from five percent to 10 percent of the population. Middle-income countries have social security coverage ranging from 20 percent to 60 percent of their respective populations, whereas in developed countries the coverage is nearly 100 percent. In the Asia-Pacific, social security schemes cover 44.1 percent of the total population of the region. 

Neighboring countries are ahead of Nepal with respect to coverage of people under social security. China has medical insurance coverage for 95 percent of its population whereas India and Bangladesh have 24.4 percent and 28.4 percent of their populations under their social security nets. But Nepal has a paltry 17 percent of its population under different kinds of social security programs. 

It is important to note here that the expenditure on social security exceeds capital expenditure in Nepal because of a low coverage of its population under social security. A trend over the years shows that the government expenditure on social security exceeds capital expenditure. This was evident in the fiscal 2021-22 and 2022-23, for example. Expenditure on social security in 2021-22 was Rs 252bn whereas capital expenditure was Rs 216bn. Fiscal 2022-23 saw a similar trend whereas in the fiscal 2023-24, Rs 253bn and Rs 234bn have already been spent under the topics of social security and capital expenditure, respectively. 

Both expenditure on social security and capital expenditure are important for Nepal’s entry into the club of middle-income countries, which is easier said than done. If Nepal desires to join the grouping of middle-income countries, its capital expenditure should exceed expenditure on social security. 

This is because capital expenditure helps increase production and productivity of the whole population, which are crucial for achieving targeted economic growth and creating employment opportunities for the masses, thereby driving the country toward prosperity and sustainability. 

Capital expenditure in Nepal leaves much to be desired as most of our rural and urban roads, which are muddy and dusty, show. Air pollution is high in the Kathmandu valley not because of the presence of industries but because of unmanaged traffic movement along highly-congested and dusty roads. Blacktopping these roads means spending capital. 

But funds for such works are hard to come by  with an increased focus on social security for targeted sections. 

Capital expenditure helps create employment opportunities for the masses, including the poor, the downtrodden, unskilled, semi-skilled and skilled youths, among others. 

Whereas expenditure on social security helps increase the consumption of targeted people such as the poor and the downtrodden, elderly citizens, malnourished children and single women. Of course, both capital expenditure and expenditure on social protection are primary duties of a modern government. 

While social protection is a must, it cannot be a substitute for capital expenditure. Thus, it is necessary to maintain discipline while spending money. Transfer of funds from one purpose to another is a common practice of the government of Nepal. 

Summing up, a government committed to social welfare and conducting development activities for sustainable economic growth must make rational decisions when it comes to spending its hard-earned capital.