The Ministry of Finance (MoF), however, said it will pledge relaxation on case-to-case basis, judging the project´s nature and priority. [break]Previously, the ministry had planned complete revocation of the provision, citing that it has surfaced as a major constraint in giving momentum to already slow development works.
“We have revised our approach. Now, we have decided to pledge relaxation on project-to-project basis,” said a MoF source.
The ministry reviewed its approach mainly as it feared blanket relaxation of the cap could again spur leakage.
The government had incorporated the cap in the spending process mainly as last hour release of massive fund in an unaccountable manner was causing massive leakage of scarce state resources. The new provision bars the government from spending more than 40 percent of the total capital expenditure during the last quarter.
It also restricts government from spending more than 20 percent of the budget in the last month of the fiscal year.
Even as adhering to the provision was important, the Ministry had recently assessed that there was a need to relax it as well, particularly to give impetus to development spending that remains pretty low at present.
MoF data shows that the government has as of mid-May released Rs 50 billion in capital expenditure, which is just over 38 percent of capital budget allocated for the year. However, Rs 16 billion of that amount still remains unspent. Given the situation, officials doubt the government would be able to spend even half of Rs 129 billion set aside for development projects this year.
“We all know the delayed announcement of full-fledged budget has hurt the development dearly. Slow spending has amplified liquidity crunch in financial system and hit employment and income opportunities,” said the official.
As large number of medium and small scale development projects has just started to come into implementation, officials in concerned ministries and political leaders have been exerting pressure to the MoF to revoke the cap.
“There is a growing demand to give momentum to development spending. Apparently there seems to be no alternative as well. Hence, we have taken a middle path,” said the source.
Newly appointed Finance Secretary Krishna Hari Baskota, meanwhile, said the MoF would soon hold meetings with secretaries of other ministries to step up capital spending.
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