Kathmandu. The Nepal government is constitutionally obligated to present the budget on Jestha 15. The government, which has been bringing a deficit budget every year, has not been able to fully spend the allocated budget for a long time. The government is obligated to reduce the budget in the mid-term review of all fiscal years. The government is also obligated to spend more than the income.
A large part of the budget is being spent on ordinary expenses and foreign debt repayments rather than on development expenses. This budget for the upcoming fiscal year is being prepared amidst a huge imbalance between income and expenditure. There are many expectations in the budget for the upcoming fiscal year amid long economic turmoil and disappointment.
Here is an edited excerpt of a conversation with Keshav Kumar Sharma, Secretary of the Ministry of Physical Infrastructure, about the budget for the upcoming fiscal year 2082/083.
What is the implementation status of the current budget?
Our resources for carrying out many major works have been shrinking since Covid. There were not many major new programs in the current fiscal year, but work has been done on additional sections of the expansion of the East-West Highway with foreign assistance. For example, the Butbal-Gorusinghe road was expanded. With the help of the World Bank, the expansion of the Pathaliya to Bagmati road section was done under contract. There are some major bridge works in Bagmati, Tinau, and Kamala. The contract for Bagmati and Kamala has been issued, while the contract for Tinau is in the process of being issued. The construction of Nagdhunga and Siddhababa tunnels is underway.
Is the Ministry of Physical Infrastructure accused of holding a lot of budget but not spending it?
We cannot imagine spending 100 percent of the budget in the current situation. Because there are obstacles in making some tenders. Even projects that have already gone to tender face many problems. They have to face shortages of utilities and construction materials.
The average expenditure of the Ministry of Physical Infrastructure has always been 80 percent. But during Covid and earthquakes, it has been 60 percent. Overall, the Ministry of Physical Infrastructure has been higher than the national average. Last year it was 72 percent. Now it is 76-80 percent.
One project may make rapid progress, there is not enough budget, another has budget, there is no expenditure. Why is there not 100 percent progress, all projects do not go at the same pace? That has its own problems. Therefore, if there is money, but there is not a little progress in that project, then even if there is progress, the project is in a situation where there is insufficient money.
No money is transferred from foreign projects. Money is transferred from Nepalese government projects a little later. That is why we do not see much economic progress in the first, second, and third. As we approach the end, there is surrender from various places and that money has to be spent. If enough money is given to all projects, then the same progress will be made, otherwise there will be no uniform progress. Just like the progress being made in the construction of the bridge, the money for the bridge has run out.
The money for the postal road has run out. It is not accepting to withdraw money from another project. It is a bit late to make payment after convincing it and since the payment is more in the last quarter, it seems that there has been a lot of progress.
The Ministry of Physical Infrastructure and Transport had asked for a budget of 180 billion in the current year. The budget we have received is 150 billion. More than 40 percent of that budget has been spent. Some of the budget is in a position to be paid. If we look at the physical progress, it has been 50 percent and the financial progress has been 40 percent. In the next 2-3 months, there is a possibility of reaching more than 75-80 percent progress.
How has the ministry prepared for the upcoming budget?
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## The ceiling set for us by the Ministry of Finance Planning Commission is 169 billion. But this time we have received only 144 billion in budget ceiling. The budget has decreased by 25 billion compared to last year. It has decreased by 6 billion compared to the current year’s budget. But our responsibility has increased.
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After the flood of last October, we will have to sign a contract after incurring losses of about 20 billion. The evaluation work is also underway. But for that, there is no additional resource and we have to do it from the current ceiling of the ministry. What I mean is that there was a ceiling of 150 billion for now, but for next year only a ceiling of 144 billion has been received. Because of this, we are currently under a huge pressure of resources.
Reconstruction work is necessary, which makes it very difficult to raise resources for the projects currently underway. There is no way to move forward with new projects. The current Mid-Hill, Postal, Corridor Road, Madanbhandari Highway, bridge construction, and upgrading programs will all be affected. Money will have to be allocated for reconstruction, but we are afraid that we will not be able to keep enough budget for that.
Even keeping the budget to run will have an impact on everything.
So how will the budget be made now?
While preparing the budget, the Ministry of Physical Infrastructure has prioritized reconstruction. While allocating a little, we are allocating budget to projects that will be completed this year. After that, priority is being given to projects of national pride and importance.
Then others will be given. Now the ministry has almost settled last year’s payment. For example, 3 billion was kept for the postal road, we paid 3 billion. But as soon as we paid that, there was a contract for 12 billion. Paying 3 billion did not solve the problem.
We paid this year’s money last year, and now new work has been going on since Bhadra to make the old payment. There was a problem in the middle of paying for that money. Instead of asking for additional budget, the Ministry of Physical Infrastructure is spending the budget of programs that have not been spent on, and is asking for payment on the condition of payment.
Not everything has been addressed. Right now, we do not have enough to pay 5-6 billion. Now it is time for other ministries to surrender their budgets. That seems to be the case now. Out of the 5-6 billion budget that is currently being worked on but remains to be paid, 2-3 billion is being raised and it will take some time to raise additional funds.
Foreign aid is becoming tight. If ADB’s aid is for a road, it cannot be spent at all. It should be spent for the purpose for which it was taken. Foreign aid that has to be spent on a project is called budgetary support.
Budgetary support is cash support to the government, it can be spent anywhere. For example: The pace of work on the Narayangadh-Butbal road was slow, there was a lot of money there, it was not said to move it here because that was the budget for a specific project. Now, the budget that has come to spend on a specific project is more, while the budgetary support is less. Therefore, it is a bit difficult for the Ministry of Finance to manage resources.
Has foreign aid decreased?
## Grants towards foreign aid have decreased. Now various banks have made a policy of not giving grants. Earlier, there were grants from JICA and China. They are also reducing their grants. Since we have already said that we are going to a developing country, bilateral and various banks have started emphasizing loans rather than grants. Grant assistance has decreased globally. Overall, there has not been a significant decrease.
What are you planning to make the budget effective?
To make the budget effective, resources should be allocated according to the need. The budget should be made in such a way that more budget can be allocated for projects that will be spent and less budget can be allocated for those that will not be spent. But there is a limit to the ceiling. Just like even if you put 8 billion in the post office, it will be spent, but you have to allocate the budget at the end. In doing so, there is no way to keep 8 billion in the post office.
Contracts in foreign aid projects have decreased. Foreign resources are sufficient. But the real money spent has decreased. Therefore, the amount required abroad has exceeded the capacity. The Nepal government is facing difficulties due to the lack of money.
A plan has been made not to take up small projects. The process is also slow in small projects. The dispersion of manpower and resources has led to laxity. We are taking care of that. The budget implementation capacity will increase next year.
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