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🇳🇵 Nepal /Economy & Trade

Provinces struggle to spend development budgets as billions remain idle

From Kathmandu Post · () English

Summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Nepal's seven provincial governments spent an average of 61.33 percent of their capital budgets last fiscal year, hindering development projects.
  • Economists cite weak preparation, poor project selection, and a lack of commitment as primary reasons for the persistent underspending, not just political disruptions.
  • The failure to spend development funds means government money remains idle, failing to stimulate economic activity and generate demand.

Nepal's provincial governments continue to struggle with budget execution, spending only an average of 61.33 percent of their capital budgets last fiscal year. This persistent underperformance, though better than the federal government's 46.79 percent spending, reflects a systemic failure to translate development allocations into tangible projects.

The main problems are weak preparation, poor project selection, lack of manpower and insufficient commitment to implementation.

— Prakash Kumar ShresthaFormer vice-chair of the National Planning Commission, explaining the reasons for low budget execution.

Economists point to fundamental issues like weak project preparation, poor selection, and insufficient commitment to implementation as the root causes. While provincial governments cite political disruptions like protests and elections, experts argue these factors do not fully explain the persistent low spending. "The main problems are weak preparation, poor project selection, lack of manpower and insufficient commitment to implementation," said Prakash Kumar Shrestha, former vice-chair of the National Planning Commission. He noted that ministries often delay crucial procedural work until after the fiscal year begins.

When capital expenditure remains weak, government money stays idle instead of circulating through the economy.

— Prakash Kumar ShresthaExplaining the economic impact of unspent development funds.

The economic consequences of this inability to spend are significant. "When capital expenditure remains weak, government money stays idle instead of circulating through the economy," Shrestha explained. "The demand that should be generated through public investment does not happen." This means that billions in allocated funds remain unused, failing to stimulate economic activity and create jobs.

The demand that should be generated through public investment does not happen.

— Prakash Kumar ShresthaFurther elaborating on the economic consequences of weak capital expenditure.

Among the provinces, Koshi showed the highest capital expenditure at 72.21 percent, while Madhesh lagged behind at 54.12 percent. Officials in provinces like Lumbini, which spent 66.80 percent of its budget, attributed the lower spending to a combination of protests, election activities, and poor coordination between federal and provincial governments. Ramji Prasad Ghimire, spokesperson for Lumbini's provincial government, stated that protests created uncertainty at the start of the budget implementation period.

The protests created uncertainty at the beginning of the budget implementation period.

— Ramji Prasad GhimireSpokesperson for the Lumbini provincial government, citing reasons for lower spending.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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