In yet another example of poor spending capacity of government bodies, various ministries and public offices have surrendered over Rs 5bn allocated for the current fiscal year 2024-25, which ends in mid-July. According to an official at the Ministry of Foreign Affairs, the majority of the returned funds are from the capital expenditure heading. Of the total amount surrendered, Rs 53.4m came from the recurrent budget, while Rs 5.03bn came from the capital expenditure budget.

As per the Financial Procedures and Fiscal Accountability Act, 2019, and the Financial Procedures and Fiscal Accountability Regulations, 2020, budget that remains unspent by mid-March and cannot be utilized within the fiscal year must be returned to the Ministry of Finance by the end of March.

The Ministry of Energy, Water Resources and Irrigation, and the Millennium Challenge Corporation (MCC), which is also known as the Millennium Challenge Account (MCA) Nepal—the implementing body of the Millennium Challenge Corporation (MCC) projects—each returned more than Rs 2bn.

Among recurrent budget returns, the Election Commission surrendered the highest amount at
Rs 24.2m, followed by the Ministry of Land Management, Cooperatives and Poverty Alleviation (Rs 15.8m), the Ministry of Communication and Information Technology (Rs 9.5m) and the Ministry of Culture, Tourism and Civil Aviation (Rs 3.9m).

In terms of capital expenditure, the Ministry of Energy, Water Resources and Irrigation returned the largest share at Rs 2.35bn, followed by MCA Nepal (Rs 2bn), the Ministry of Industry, Commerce and Supplies (Rs 367.8m), the Ministry of Foreign Affairs (Rs 300m), and the Office of the Auditor General (Rs 16.1m).

With less than three months of the fiscal year remaining, the government has been able to spend only 56.56 percent of the allocated budget till April 28. The progress in capital expenditure remains at a dismal 30.93 percent. Capital expenditure has consistently slowed since the Covid-19 pandemic. In 2021-22, only 57.23 percent of the development budget was spent. Capital spending improved to 61.44 percent in 2022-23 and 63.47 percent in 2023-24. Over the past four years, the average capital expenditure has hovered around 60 percent. 

Current spending trends suggest that 2024-25 will follow a similar trajectory. Before the pandemic, Nepal achieved higher capital spending rates, averaging around 70 percent. Capital expenditure stood at 76.93 percent in 2018/19 and 80.77 percent in 2017-18.