A recent study has highlighted the challenges of increasing capital expenditure in Nepal without significant policy and institutional reforms. The government’s failure to effectively utilize allocated funds has hindered the construction sector, which in turn has had a negative impact on the broader economy.
The study, conducted by the Confederation of Nepalese Industries (CNI) and the Society of Economic Journalists-Nepal (SEJON), examined the status of budget implementation for the current fiscal year. It found that the failure to implement the reform programs outlined in the budget has led to a significant portion of funds remaining unspent, which has severely affected the infrastructure development sector.
The study identified several reasons for the lack of implementation, including poorly prepared plans, the current government’s reluctance to adopt budgets introduced by the previous administration, and the failure to enact the necessary reforms promised in the budget.
At a recent CNI-organized event in Lalitpur, where the state of budget implementation in the infrastructure sector was discussed, the National Planning Commission (NPC) emphasized that the 16th Five-Year Plan calls for an annual investment of Rs 2 trillion in infrastructure. However, only around Rs 300 billion has been allocated annually to the sector, and even that amount has largely gone unspent. Over the past few fiscal years, only about 60% of the allocated budget has been used effectively.
According to the study, of the seven infrastructure-related priorities outlined in CNI’s Budget Watch for the fiscal year 2023/24, only one has been partially implemented in the first quarter, while four show limited progress, and two have seen no progress at all.
During the program, NPC Vice-Chairman Prof. Dr. Shiva Raj Adhikari shared that discussions are ongoing with various ministries to identify ways to reduce barriers and improve coordination to boost capital expenditure. “We are working to streamline processes, resolve forest-related issues, and improve procurement and financial management systems,” he said.
Adhikari emphasized that better results could be achieved by preparing a list of budgeted projects by mid-March, finalizing plans and resources ahead of time, and adhering strictly to those plans. He added that the government is prioritizing the completion of ongoing projects over introducing new ones.
Sushil Gyawali, CEO of the Investment Board Nepal, pointed out that the 16th Five-Year Plan envisions Rs 11.2 trillion in investments for the infrastructure sector, with Rs 3.5 trillion expected from the government and the remainder from the private sector.
Gyawali stressed that assigning clear action plans and responsibilities at all levels of government could help overcome challenges in the infrastructure sector. He attributed delays and confusion in project execution to a lack of clarity and coordination within the federal system. He also suggested that, to ensure the effective implementation of the five-year plan, it must be legally binding, leaving little room for adding new projects. The government is reportedly working on institutional reforms to address these issues.
Krishna Panta, an undersecretary at the Ministry of Physical Infrastructure and Transport, pointed to issues such as fragmented project distribution and inadequate budgeting as barriers to successful project implementation. He cited an example where lawmakers allocate just Rs 10 million for projects that cost Rs 250 million, resulting in a lack of progress. He also noted that the slow pace of capital expenditure is partly due to delays in advancing public procurement reforms.
CNI President Rajesh Kumar Agrawal underscored that infrastructure development is crucial for revitalizing the economy. “The stagnation of the economy is largely due to inactivity in the infrastructure sector,” he said. He called on the government to take necessary actions to ensure that the allocated budget is fully spent each year.
At the event, Sujan Oli, President of SEJON, presented an overview of the infrastructure budget’s implementation status, while CNI Vice President Birendra Raj Pandey noted that the focus of the upcoming investment conference will be on advancing policies and implementation strategies to improve the infrastructure sector.
