18 November, Kathmandu. A review meeting is being held in the Prime Minister’s Office and the Council of Ministers tomorrow (Monday) on ‘weak development expenditure’ in the current financial year (2079/80). Earlier, all the ministries had reviewed their development expenditure in a similar meeting.
The concern that growth spending is slow and vulnerable to easing conditions is not the only one at present. Since before, several meetings have been held in Singh Darbar for monthly, quarterly and annual discussion and coordination to increase the development expenditure. The National Planning Commission and the Department prepare a list of problems. But, in the end the result is the same. By the end of the year, nearly half of the allocated development budget freezes, while in June a third of the total expenditure goes unutilised.
Even after 4 months of the current year 2079/80, the development expenditure has not reached even 8 percent. Still big projects are in ‘coma’. The government, which is working on contracts worth about 4 billion, has not spent even 30 billion in 4 months.
According to the daily budgetary system of the Office of the Controller General of Accounts, of the capital budget of Rs 3.80 billion allocated for the current year, Rs 29.25 billion has been spent. This is just 7.69 per cent of the total capital budget.
Last year, Rs 24 crore 49 lakh (6.48 per cent) was spent in the capital budget during the same period. Last year, the development budget was affected when the replacement budget was delayed. 31 billion 260 crores or about 8.86 percent of the capital expenditure had already been done during the financial year 2077/78, even amid the severe problems of the second wave of the Corona epidemic. This explains the current pace of capital expenditure.
Shiv Prasad Nepal, spokesman for the Ministry of Physical Infrastructure and Transport, acknowledges that the practice of hastily budgeting and programing based on access and holding meetings to find solutions all the time due to lack of development expenditure will not solve the problem.
“It is wrong to expect expenditure without preparing the expenditure structure and project,” he says.
Spokesperson Nepal said that the practice of connecting new schemes in Hachuva is causing trouble if the old schemes do not work.
“Projects do not have forest support for tree felling, electric poles are also possible to move, land is difficult to find somewhere, construction material is a problem.” Nepal says that due to all the parties not being able to take full responsibility for the development and construction of the country, the work that could have been done has also stopped.
Bikase Adda and the projects under them say that development expenditure has been held up due to difficulties in compensation, tenders, evaluation, approvals and contractor mobilization and project management.
Since the government has given instructions to award contracts for various projects, which have not been prepared in advance, the contract process for some of them could not be started in time. Even when the government changes the budget, it is not allocated according to the requirement of the officers of Bika Adda.
A road department official says the development cost is low as it takes at least 3-4 months to complete the tender evaluation, approval and contract. “Now most of the new projects are in process,” he said.
According to the department, in the projects where everything is smooth, work will start from January and payment will start from March and the expenditure will increase. The officials of the department say that the work done equal to 8 billion has not been paid.
Development projects are not only affected by problems shown by government agencies. In the past, the builders who were the busiest at the end of the financial year started construction after the beginning of July on the pretext of rains. They say that work will be done only after celebrating Dashain-Tihar. This year, they got more arms, representatives and state assembly elections on 4 November.
But even after the elections, the builders did not speed up the work. Instead, they have started showing other problems. According to the Federation of Nepal Construction Professionals, currently banks are not giving loans to construction professionals. Businessmen argue that development expenditure has been affected as they do not have enough funds to go ahead with the projects. Federation President Ravi Singh alleges that the base of the government is stuck because of not even giving the bill for the work that has been done.
In Nepal, the period from November to June is considered the main construction season. However, despite the liquidity crisis, the builders have not increased the pace of work. Even in big projects, limited employees are working.
“Construction businessmen have not been able to procure essential construction materials due to lack of liquidity,” he said, adding, “Construction work has not picked up pace.”
In general: When development spending is weak, the liquidity (investable capital) crisis worsens and problems appear in the economy. However, due to the liquidity crunch, only those who are in charge of development expenditure are affected. Construction professionals claim that development work has been affected by systemic problems, including liquidity in the economy.
Banks currently have deposits of 51 trillion 87 billion rupees, while banks have already invested 47 trillion 60 billion rupees in loans. The loan-deposit ratio has reached 86.85 per cent. The lack of investible liquidity has also affected development and construction work. The contractor companies, who are responsible for bringing the government’s money to the market by getting the development work done, are sitting on the sidelines complaining of lack of cash.
He says, “Earlier we used to bring goods by taking loans from industries. When the banks stopped giving loans, the industries asked for cash.
Chairman Singh said that since banks have stopped getting loans, lenders are also facing problems in doing cash transactions to complete development projects.
Chairman Singh says that work cannot be done without liquidity, due to which the development expenditure will decrease and the liquidity crisis in the monetary sector will deepen.
It is not only the builders who have shown problems. Due to lack of construction work, the demand for construction materials has decreased. Apart from cement and rods, the prices of other construction materials have increased. Traders argue that this has slowed down the construction industry.
Last May, builders had declared a ‘construction holiday’, demanding revision of the contract price. Still they are in favor of adjusting the price according to the construction material and shipping charges. The federation has not withdrawn the construction holiday. The Federation argues that until the problems of construction professionals are resolved, the rate of ‘development expenditure’ will not increase substantially.
“If we are provided with balance payment as well as liquidity of Rs 70-80 billion, the development work will naturally pick up pace,” said Federation President Singh.