Development spending stalls at 16 percent

Even after half a year, the government has struggled to accelerate development expenditure, with only 16.16 percent of the total allocated budget spent so far. This mirrors the performance from the same period last year, where approximately 16 percent of the budget was utilized. The sluggish pace has disrupted the entire economic chain of the nation.

In the first six months of the current fiscal year, the government spent Rs 56.93bn against a target of Rs 352.35bn for development projects. Historically, the government has consistently fallen short of its targets, attributing the slowdown to underperformance in capital expenditure.

Economist Chandramani Adhikari emphasized the need to address the root causes of delays in priority projects to improve development expenditure. He highlighted the importance of identifying issues such as managerial inefficiencies, legal constraints, or shortcomings among construction contractors. “It’s essential to pinpoint the bottlenecks, whether it’s funding issues, legal hurdles, lack of coordination at multiple levels, or contractor inefficiencies. Solutions must be implemented accordingly, and budgets should be reallocated to projects with better management capacity,” he suggested.

Mahesh Bhattarai, spokesperson for the Ministry of Finance, acknowledged that inadequate project preparation is a major challenge. “We should allocate budgets only for projects that are fully prepared. However, resources have been scattered due to poor prioritization,” he explained. Bhattarai also noted that the lack of commercialization in the construction sector, which largely involves private actors, further hampers progress. “Many projects are delayed because contractors fail to meet deadlines. Additionally, societal attitudes towards the benefits of development projects need to evolve to foster a proactive approach,” he added.

According to Bhattarai, the government has disbursed Rs 22bn out of Rs 29bn based on certified documents, while dismissing complaints from contractors seeking to extend deadlines without sufficient justification.

By the month of December, the government had spent Rs 667.60bn from a total budget allocation of Rs 1.86trn. Out of the Rs 1.14trn targeted for development, only Rs 4.52bn has been spent so far—representing 39.63 percent of the total target. Concurrently, the government faces increasing obligations to repay principal and interest on both domestic and foreign loans. This has resulted in the allocation of 43.2 percent of financial management expenditure to cover previous fiscal year liabilities. The government has earmarked Rs 367bn for public debt repayments and has already paid Rs 158bn.

While the country’s external sector shows signs of improvement, the internal economy continues to struggle. Despite these challenges, the government has managed to collect 39.43 percent of its total revenue target, raising Rs 559bn in the first six months. This includes Rs 489bn from tax revenue (38.09 percent of the Rs 1.284trn target) and Rs 70bn from non-tax revenue (51.97 percent of the Rs 135bn target). However, foreign aid and grants have fallen short, with only Rs 7bn (14.09 percent of the Rs 52bn target) collected so far.