With less than two months remaining in the current fiscal year, the government has managed to spend only 32.78 percent of its allocated capital budget. This chronic underperformance in capital expenditure is not new. Rather, it is part of a concerning pattern that has plagued the national development trajectory for years.
The failure to effectively utilize the capital budget affects Nepal’s economic prospects. In the last fiscal year, only 63.47 percent of the Rs 302bn capital allocation was spent. Worse still, capital spending has averaged around 60 percent over the past four years, a steep decline from the pre-covid average of 70 percent and a sharp fall from highs of over 80 percent in 2017-18. These figures reflect a system that struggles with efficiency, planning and execution.
The consequences of low spending are multifaceted. On the surface, infrastructure development is delayed or left incomplete. More deeply, low capital spending restricts job creation, depresses local economic activities and drives a surge in labor migration. The country’s inability to create sufficient employment opportunities has forced millions to seek work abroad. This clearly shows that the domestic economy is not growing fast or inclusively enough.
The root causes of this underperformance are well known. Bureaucratic delays, poor project readiness and ineffective implementation continue to hit development projects. Moreover, a recurring trend of accelerated spending in the final months of the fiscal year leads to rushed projects and compromised quality, which affects project outcomes and diminishes the long-term value of public investments. While recurrent expenditures are being met at a higher rate, capital spending has remained dismal. This imbalance not only undermines developmental aspirations but also affects fiscal credibility and the government’s ability to deliver on its promises at a time when some sections of society are questioning the relevance of the federal republican system.
The government must prioritize structural reforms to speed up spending. Streamlining bureaucratic procedures, strengthening project planning and financial oversight and directing funds toward shovel-ready projects are critical steps that it must take. Moreover, enhancing accountability mechanisms will ensure that public resources are used effectively and transparently. Persistent underutilization of capital budgets is not just a fiscal statistic, it is a roadblock to progress. Until this foundational flaw in public expenditure stays, long-term growth will remain elusive, and the dream of a self-reliant, prosperous Nepal will continue to drift further away.
