The Lumbini provincial government has stopped payments 15 days prior to the end of the current fiscal year after exhausting its accumulated funds. The Lumbini Ministry of Economic Affairs and Planning has apprised the Provincial Treasury Comptroller Office of the matter.
The decision will affect many construction entrepreneurs who were expecting to receive their payments by this fiscal’s end. Most of the offices under the province have already informed construction entrepreneurs they cannot pay beyond July 9.
The provincial government has consistently adopted a deficit budget, shifting the liability to the next fiscal year. For the upcoming fiscal year 2025/26, it has proposed a deficit budget of about Rs 7bn. However, payments for schemes funded by the Government of Nepal’s conditional, special and complementary grant sources have not been stopped. These include matching funds from provincial sources in complementary grant projects; provincial contributions in foreign-funded projects under conditional grant; and provincial consolidated funds, including salaries, allowances, and operational expenses.
Payments for all other schemes were suspended from June 29. If it is extremely necessary to spend, the ministry has issued a circular stating funds can be spent or disbursed with valid justification for doing so. The sudden freezing of accounts has affected the plans of the Ministry of Physical Infrastructure Development, which accounts for a significant portion of the development budget. The ministry has allocated a budget of Rs 9.9bn for the upcoming fiscal year.
After the sudden payment freeze, the Rupandehi Road Infrastructure Development Office has been unable to pay Rs 35m owed to 25 projects. “The liability had been transferred in the previous fiscal year as well,” said Office Chief and Senior Divisional Engineer Lalu Giri. “This year too, it seems that the liability will be transferred. Construction entrepreneurs are working in the field. There is a written agreement. However, there is no way to pay for them.”
Senior Engineer Deepak Khadka, chief of the Banke Road Infrastructure Development Office, said payments worth around Rs 20m are pending. “Construction entrepreneurs are demanding payments, but we have no answers,” he said.
The Pyuthan Road Infrastructure Development Office has been unable to pay Rs 10.5m for eight projects. “We had agreed to clear the payments by June 8, but the account was unexpectedly frozen,” said Senior Engineer Chandra Shah.
The Provincial Financial Procedures and Fiscal Responsibility Act mandates closure of accounts a week before July third week. The provincial government has disregarded this provision.Sources estimate that the provincial government owes Rs 1.5bn for completed works.
