Poor Spending, Bigger Deficit

Another fiscal year has ended with a familiar and costly failure: the government spent less than 45 percent of the budget allocated for development projects, while the national treasury closed the year with a deficit of more than Rs 344 billion. The numbers tell a troubling story. Of the Rs 407.88 billion allocated for capital expenditure, only Rs 181.59 billion was spent. This is not merely below target; it is significantly worse than last year's execution rate of 59.59 percent. At the same time, total government spending reached Rs 1.565 trillion against total revenue of Rs 1.221 trillion, leaving a financing gap that will have to be bridged through borrowing and other sources. The spending pattern reveals where the government's priorities ultimately lay. Recurrent expenditure exceeded 88 percent, covering salaries, pensions, social security, and administrative costs. Financial management expenditure also surpassed 90 percent. Development spending, which finances roads, irrigation systems, schools, hospitals, and other productive assets, remained the weakest link. Revenue collection also fell far short of its target, placing additional pressure on public finances. Taken together, these figures expose a fiscal structure that spends comfortably on consumption but struggles to invest in long-term growth.

A budget deficit is not inherently harmful. Many developing countries borrow to finance infrastructure and expand productive capacity. Financing roads, energy projects, and industrial infrastructure is a prudent use of debt because the economic activity generated by such investments can repay today's borrowing in the future. Nepal's problem, however, has remained unchanged for years. Project preparation often begins late, procurement processes drag on for months, and contract disputes delay construction work even before projects get underway. Land acquisition issues remain unresolved, while environmental clearances are often delayed. Poor coordination among government agencies and shortages of skilled labor further slow implementation. Political interference adds yet another layer of complexity. By the time many of these obstacles are addressed, the fiscal year has already passed its halfway point. The government also continues its undesirable practice of rushing expenditure during the final weeks of the fiscal year. Such last-minute spending rarely results in quality infrastructure. When funds are released hastily, effective oversight becomes difficult, undermining taxpayers' confidence that public money is being spent wisely. The pressure to complete projects within tight deadlines often leads to cost overruns, delays, poor workmanship, and expensive repairs later.

Weak capital spending has consequences that extend far beyond unfinished projects. Every delay in irrigation infrastructure reduces agricultural productivity. Every postponed bridge or road project raises transportation costs for businesses and communities. When public infrastructure remains incomplete, investors become hesitant to commit capital. Public investment is meant to stimulate economic growth and create opportunities for the private sector, as demonstrated by many successful economies. Yet Nepal's weak revenue performance has further constrained such investment. Lower revenues force the government to rely more heavily on borrowing, increasing debt-servicing obligations and leaving even less fiscal space for future capital expenditure. The government must begin project preparation well before announcing the budget, strengthen procurement procedures, establish strict implementation timelines, hold project leaders accountable for delays, minimize political interference, and improve coordination among ministries and agencies. Nepal's problem is not a shortage of plans or ideas but a persistent failure of execution. Public investment must become faster, smarter, and more disciplined. Otherwise, widening budget deficits will continue to finance consumption, debt repayments, salaries, pensions, social security allowances, and administrative costs without generating the productive investments needed to sustain long-term economic growth.