Reconstruction spending key to achieving growth target

Kathmandu, July-17 The budget for Fiscal Year 2015/16, which was presented in the parliament on Tuesday, has allocated substantial fund for reconstruction. As reconstruction programs are to be implemented by National Reconstruction Authority (NRA), everyone is waiting for appointment of CEO and key officials the authority for early execution of reconstruction programs.
 

Quake-hit people have high expectations from the government. They want the government to rebuild their homes, repair roads and highways and make schools and health centers operable at the earliest with 'build back better' approach. Even private sector and donors have similar expectations from the government. They are hopeful that NRA would be different from other government agencies, which are often characterized by low performance, that fail to spend even 50 percent of budgetary allocation.

"We need special mechanisms like NRA at the earliest possible so that reconstruction programs can be executed immediately in a time-bound manner," Hari Bhakta Sharma, senior vice president of Confederation of Nepali Industries (CNI).

NATIONAL RECONSTRUCTION AUTHORITY

It has nearly been four weeks that government issued an ordinance for formation of NRA mainly to convince donors that funds pledged by them would be handled effectively. But the government has not given NRA the final shape yet. Many believe the appointment process is getting delayed because ruling parties want their men at the helm of the authority. They say the issue won't be sorted out anytime soon.

The government has set aside Rs 74 billion for NRA. Even Minister for Finance Ram Sharan Mahat had indicated that NRA will not get full shape soon. Presenting the budget, Mahat said: "A separate fund of Rs 17 billion has been earmarked for the line ministries to carry out work of rebuilding and reconstruction of private houses, public building, schools, health offices and historical and cultural heritage until the authority is formed."

Economist Madan Kumar Dahal said the government has hinted that reconstruction is not in top priority. "The reconstruction fund is lower that what the government has allocated for education sector (Rs 98 billion," he said, adding, "The growth target of 6 percent cannot be achieved even if the entire fund allocated for reconstruction is spent."

Commenting on the budget in the parliament on Wednesday, former Prime Minister and UCPN (Maoist) leader Baburam Bhattarai said the government is not serious about appointing CEO and key officials in NRA. "It has allocated reconstruction budget for line ministries that lack capacity to spend. It is mere dilly-dallying tactics," said Bhattarai. He also said the government hasn't started preparation for reconstruction yet.

The reconstruction authority has been envisioned so that reconstruction works can be carried out in a fast track mode. It is not required to follow prescribed procedures for land acquisition, environmental studies and procurement process, among others.

Minister for Information and Communications Minendra Rijal, who is also the government's spokesperson, told Republica that appointments in NRA would be made soon after holding political consultation. "The process is getting delayed as political leaders were busy preparing draft of the new constitution. Similarly, we couldn't pay attention to NRA due to budget preparation and International Conference on Nepal's Reconstruction," Minister Rijal added.

WHY MINISTRIES CANNOT SPEND?

Statistics shows government's spending performance is eroding with every passing year. Of the total development budget of Rs 116 billion allocated for the current fiscal year, Rs 46 billion has remained unspent. Lengthy project preparation and procurement process, and lack of ready projects and governance are some of the factors behind low spending.

Minister Mahat had announced number of policy reforms last year to boost spending. But majority of them limited in papers. The government could make amendment to only Public Procurement Act 2007. Other bills for amendment to different laws are gathering dust in parliament. Also, there was no winter session of parliament which is often known as bills session.

Economist Dahal said the government has not accepted underlying factors like mounting corruption and lack of good governance behind low expenditure.

'BUDGET IMPLEMENTATION YEAR'

Minister Mahat has floated the idea of announcing Fiscal Year 2015/16 as 'Budget Implementation Year' to improve project implementation and capital spending. Ministry of Finance will issue the budget authorization authority to implementing agencies to shorten time required for program approval, Minister Mahat said, while presenting budget on Tuesday. He also said outdated laws of 1990s is one of the reasons that is slowing capital spending.

To improve capital spending, the government has expressed commitment not to transfer projects chiefs who have achieved spending progress of more than 80 percent. Similarly, it has said progress in spending will be one of the criteria for reward and punishment of officials. Likewise, ministries will be forced submit fund of the project if ministries fail to make 50 percent progress within second trimester. Such fund will be transferred to other projects that are in need of fund.

Economic experts and representatives of private sector are still not convinced that these measures would be sufficient to boost capital spending. All those interviewed by Republica right after the budget speech had said they have doubts that the promises made in the budget will be translated into reality.

Former Finance Minister Barsha Man Pun said at a program recently that the government had failed to bring concrete plans to improve implementation of programs.

Similarly, Sharma of CNI said investment environment would have improved had there been some strong and time-bound commitments for execution of major projects like Kathmandu Tarai Fast Track and Upper Tamakoshi. "Spending won't improve without serious intervention in project execution," he said, adding, "Effective reconstruction works can make economy vibrant and create demand in the market. To make reconstruction works effective, NRA should focus on time-bound plan for preparation and implementation of projects."

Speaking at post-budget discussion on Wednesday, Minister Mahat had said he was not sure whether or not the allocated funds would be spent. "We can achieve the growth target of 6 percent only if the entire Rs 208 billion earmarked for capital spending is spent," he added.

Source: Republica