As the government asserts its commitment to improving Nepal’s economy, stakeholders have voiced concerns over the persistently low levels of capital spending. A recent study underscores that without significant policy and structural reforms, increasing capital expenditure remains challenging.
The study, conducted jointly by the Confederation of Nepalese Industries (CNI) and the Society of Economic Journalists Nepal (SEJON), analyzed the implementation of the budget for the first four months of the fiscal year 2024/25. It highlighted that reform programs proposed in the budget were largely unenforced, contributing to poor capital spending and inadequate infrastructure development.
Key findings reveal that many projects included in the budget lacked proper preparation, and the current government’s lack of ownership over initiatives introduced by the previous administration further hampered implementation. Despite the 16th periodic plan estimating a need for Rs 2,000 billion annual investment in infrastructure, only Rs 300 billion was allocated this year, much of which remains unspent.
The study found that out of seven infrastructure-related budget categories, only one was fully implemented. Four saw partial progress, while two remained untouched. These findings were shared during the release of the “Budget Watch” report on Friday.
Key Voices and Recommendations
Dr. Shiv Raj Adhikari, Vice Chairman of the National Planning Commission, emphasized the necessity of better coordination among ministries and their subsidiaries to boost capital spending. He called for early identification of projects, allocation of resources before Chaitra, prioritization of ongoing projects, and strict enforcement of project implementation guidelines.
Sushil Gyawali, Chief Executive Officer of the Investment Board, highlighted the enormous investment required for infrastructure development, estimated at Rs 11,200 billion over five years as per the 16th periodic plan. Of this, Rs 3,500 billion is to be funded by the government, with the remainder expected from the private sector. He attributed delays to unclear responsibilities among federal, provincial, and local governments under the federal system, and emphasized the need for cooperation and power devolution.
Joint Secretary Krishna Raj Panth from the Ministry of Physical Infrastructure and Transport pointed to scattered resource allocation and a lack of focus. He criticized the trend of federal lawmakers diverting funds toward minor projects, exacerbating inefficiencies. Panth also noted the failure to reform public procurement processes as a major impediment to capital spending.
CNI Vice Chairman Birendra Raj Pande advocated prioritizing infrastructure development through investment summits. He urged the government to transform financial instruments like green bonds and infrastructure bonds from mere proposals into actionable tools.
The Way Forward
The report’s findings highlight critical gaps in planning, preparation, and enforcement of the budget, which have stalled infrastructure development. With stakeholders pushing for reforms, including better intergovernmental coordination, improved project selection, and stricter enforcement of financial tools, addressing these systemic challenges could pave the way for more efficient capital spending and sustained economic growth.
