Inflated revenue mobilization, uncertain Melamchi project and more

Federal government’s figure on revenue collection a hoax

From The Himalayan Times: The government, which has been boasting of a brisk revenue collection since the start of this fiscal year, has suffered a rude jolt, as the body which operates its treasury has been found to be inadvertently producing inflated figures because of double counting. The erroneous reporting on revenue collection came to the fore after the Financial Comptroller General Office, the main agency responsible for the government’s treasury operation, stated that the government had generated revenue of Rs 520 billion in the first half of this fiscal.

The figure surprised many because it was 21 per cent more than the government’s own revenue collection target of Rs 429 billion for the six-month period from mid-July to mid-January. At a time when the Ministry of Finance was apprehensive about meeting its own target because of slackness in collection of duties at customs offices, the news that revenue collection beating the target by close to Rs 100 billion was too good to be true. Turns out it was.

Nepal Rastra Bank, which also tracks the government’s revenue collection, has said the government generated Rs 414.3 billion in revenue in the same six-month period. This means the government missed its revenue collection target by 3.4 per cent in the first six months. After crunching its own numbers, the FCGO has acknowledged its mistake and told THT today that the central bank’s figure was closer to reality.

“We failed to present accurate statistic because of double calculation of fund transferred to divisible fund,” said a senior FCGO official on condition of anonymity. Since the beginning of this fiscal, the federal government has been sharing 30 per cent of value added tax and another 30 per cent of inland excise duty with provinces and local bodies as part of the policy to financially empower sub-national governments and institutionalise fiscal federalism. The portion of VAT and inland excise duty dedicated to provinces and local bodies is parked in the divisible fund. “Although the amount deposited in the divisible fund is also a part of federal government’s revenue, we had initially decided to keep it separate,” said the FCGO official. This means FCGO’s system had to deduct the amount kept in the divisible fund from the federal government’s gross revenue. But the deduction was not made,” added the official.

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Government scraps Melamchi contract of Italian builder

From The Kathmandu Post: The government has decided to scrap the contract with the Melamchi Water Supply Project’s Italian builder in a move which will push the national pride project into further uncertainty. “The government formally dispatched a letter of termination to the Italian contractor Cooperativa Muratori e Cementisti di Ravenna after it failed to come up with any concrete decision regarding resuming works,” Surya Raj Kadel, executive director of the Melamchi Water Supply Development Board, told the Post. “We have decided to terminate the contract with the existing builder after it did not turn up to resume works even a month after abandoning the project.”

In its previous letter sent last Tuesday, the government had set a Friday deadline for the CMC to make it clear whether it was interested to resume works and how it would want to resolve the dispute. According to Kadel, the Italian builder did respond but sought at least one more week. “We received a meaningless correspondence which had not even come from the proper channel… and it just sought more time. We cannot do that anymore,” Kadel added. CMC officials on their part told the Post that the Nepal government gave them “a very short deadline”.

“For a meeting set for January 18, the employer [Nepal government] had sent us a message on the night of January 15. The company had responded saying it was not possible to meet within three days’ time,” a CMC official said. “We had said a meeting was possible at a suitable time-around January 27 or so and we had also sought diplomatic assurances.”

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Govt pays Rs 758m in interest subsidy for agro-livestock loans

From myRepublica:  The government has disbursed  Rs 758.2 million in interest subsidy for loans floated under a concessional credit scheme for certain agricultural and livestock businesses.  It bears five percent of the interest for loans disbursed by banks and financial institutions. According to  Nepal Rastra Bank (NRB), the outstanding subsidized loans aimed at encouraging youths to pursue agriculture and livestock businesses through BFI loans stand at Rs 14.39 billion as of mid-December. 

A total of 9,749 beneficiaries have borrowed under the scheme, according to NRB data. The scheme was introduced by the government in fiscal year 2014/15 and the subsidy rate was revised after two years. Those who want to start or expand certain agriculture or livestock businesses can get the concessional loans from BFIs. 

The government subsidizes five percent of the interest on the loans under the scheme. The data shows that the government has so far spent Rs 758.2 million on subsidizing the interest. The upper limit for concessional loans under the subsidy scheme has been fixed at Rs 700 million with a maximum payback period of five years. BFIs have to provide loans under the scheme against the collateral of land used for the agro or livestock undertaking or the crops. Loans can be disbursed against group guarantee up to a limit of Rs 1 million.

>>Here is a news story about misuse of the interest subsidy program

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New public debt management office, energy banking between Nepal and India, and more

Nepal and India agree on energy banking

From The Kathmandu Post: Nepal and India have agreed to set up an energy banking mechanism that will prevent spilling of electricity generated in the country when production surpasses demand, a situation the domestic energy sector is expected to face in a few years’ time. Energy banking involves exchanging electricity for electricity instead of cash. Under this mechanism, one country exports electricity to the other when it has a surplus, and imports back the same amount of energy when it has a deficit.

Nepal Electricity Authority (NEA), the state-owned power utility, and Central Electricity Authority (CEA) of India on Wednesday agreed to the draft of the guidelines on power exchange. The draft will be presented for approval before the energy secretary-level joint steering committee (JSC) meeting scheduled to be held in January.

Nepal had long been advocating energy banking saying that seasonal complementarities of demand and supply of electricity in Nepal and India will make the mechanism a suitable model of power transfer. As a majority of power plants in Nepal are run-of-the-river type, they generate a large amount of electricity during monsoon. The surplus coincides with a sharp rise in demand for electricity in the Indian states of Uttar Pradesh, Haryana and Punjab due to increased power consumption in the farm sector.

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Nepal expected to harvest record 5.6m tonnes paddy

From The Himalayan Times: Paddy productivity is estimated to go up by 8.6 per cent in the current fiscal year to 3.8 tonnes per hectare on the back of favourable monsoon, timely availability of fertilisers and use of modern tools and equipment. Paddy productivity stood at 3.5 tonnes per hectare in 2017-18, according to the Ministry of Agriculture and Livestock Development (MoALD). With the growth in productivity, paddy output is expected to hit an all-time high of 5.6 million tonnes in the current fiscal year, up 9.8 per cent than in the last fiscal year, data released today by the MoALD show. Nepal grew 5.1 million tonnes of paddy in the last fiscal year. The jump in paddy production is expected to raise total agricultural production, as the crop makes a contribution of over 25 per cent to overall agricultural output.

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Investment summit in March 2019

From myRepublica: The government is organizing a second investment summit in March next year. Organizing a press meet at the Ministry of Finance on Thursday, Minister for Finance Yuba Raj Khatiwada, who is also the coordinator of the summit organizing committee, said that the two-day Nepal Investment Summit 2019 will kick off on March 29. The summit, among others, aims at promoting Nepal as a lucrative investment destination, according to officials of the Investment Board of Nepal (IBN), which is the coordinating agency of the event.

The government had hosted the first investment summit in March last year. The summit had secured investment pledges worth US$ 13.74 billion. However, most of the pledges have been limited to paper as not a single letter of intent (LoI) has materialized as real investment so far. Speaking at the press meet, Finance Minister Khatiwada, who is also the vice-chairman of the IBN, said that the summit was being held with an objective to translate the country’s long-term development ambition into achievement. “The summit will also help to share with investors what we have done to make the country more investment-friendly,” he added.

IBN CEO Maha Prasad Adhikari told Republica that the investment summit is a part of the government’s initiatives to attract foreign direct investment. Asked why another summit was needed when the investments pledged of the last summit was yet to realize, Adhikari said that the IBN along with other government agencies are following up with the investors. According to Adhikari, over 25 percent of such LoI is in the process of realization. 

>>My take on the proposed investment summit here

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Nepal establishes Public Debt Management Office 

From The Himalayan Times: Government has established the Public Debt Management Office with a view to manage public debt in an integrated manner. Finance Minister Yubaraj Khatiwada inaugurated the office in Putalisadak amidst a programme here today. The office established as a subordinate body of the Ministry Finance will function autonomously. Prior to this, Nepal Rastra Bank (NRB) dealt with proceedings related to internal borrowings and Public Debt and Investment Section at the Office of the Auditor General owned the responsibility of managing external and domestic debt.

The newly established office will look after works relating to debt management including some works of the Finance Ministry. According to Office Chief, Bishnuraj Dhakal, the office will support effective implementation of the government’s fiscal and monetary policies. It will invest in public enterprises and recover loans.

Moreover, it has been given the additional responsibility of looking after some tasks relating to the internal and external debt executed by the International Cooperation Coordination Division and Economic Policy Analysis Division of the Ministry of Finance. It has also been assigned to prepare a draft of the public debt policy. On the occasion, the Finance Minister expressed hope that the government’s fiscal and monetary policies will become more effective with the office coming into operation.

Central bank tweaks regulations to aid stock market

Closely following the recommendations of a committee formed to study the slide in stock market and to reinvigorate it, the central bank tweaked rules and regulations yesterday. 

Specifically, 

Issuance of loan against shares by the banks:  Reduced the risk weight in such loans to 100% from 150%. Offer loan up to 65% of the valuation of shares based on the average price in the past 180 days or the prevailing market price, whichever is lower. Earlier, the threshold of margin lending stood at 50%.  They can also issue loan on shares equivalent to at most 40% of their core capital. Earlier, the NRB had restricted banks to issue loan in shares up to 25% of the core capital.

Margin call:  Banks will now consider right and bonus shares as collateral while valuating shares to make the margin call. Earlier, they were allowed to make a margin call if valuation of shares fell below 20% of the approved value while issuing loan. 

>>These measures will help to increase flow of funds to the stock market, which was crippled by lack of funds as BFIs started to jack up deposit rates. 

Interest spread rate: Banks will have to maintain spread rate at 4.5% by mid-July 2019. Spread rate is the different between deposit and lending rates. They need to reduce spread rate to 4.75% by mid-April 2019. Earlier, it was 5%. 

>>This will help to reduce lending rates. High interest spread is an indication of lack of efficiency and competitiveness of BFIs. High interest spread has its root in a number of factors: risky investment, high inflation (although this is not a case now), high operating costs, reliance on interest income for survival amidst cut-throat competition to rope in depositors, diseconomies of scale due to small market size (which necessitates consolidation of BFIs), and poor access to finance. NRB has been monitoring spread since mid-July 2014 and has been instructing BFIs to bring it down. 

Base rate: Base rate is calculated by BFIs by adding the cost of fund, cost of Cash Reserve Ratio, cost of Statutory Liquidity Ratio, operating cost, and return on asset (ROA). Now, BFIS do not have to to add 0.75 percent ROA while calculating their base rate.

>>This will reduce reported profits of BFIs. Ideally, base rate is published to enhance transparency in lending rate and to strengthen monetary transmission mechanism. NRB started to monitor base rate since 2013 in the case of commercial banks, and since 2014 in the case of development banks and finance institutions. BFIs do not lend below their respective base rate.  

Institutional deposit: The ceiling for share of institutional deposits has been increased to 50% from 45%. 

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The committee formed by finance minister has recommended ways to revive the stock market so that is is always in the bullish zone. Tweaking banking regulations to increase temporary funds flowing to stock market is hardly the solution that is needed now. NEPSE should be responding to economic fluctuations more than the variation in cash savings of few players/speculators. A strong and stable stock market mobilizes capital for investment.

One of the unfinished financial sector reform agenda is consolidation of BFIs, which will help to enhance capital base, operational efficiency and resilience of BFIs. NRB has imposed a moratorium on new BFIs and has been nudging BFIs go for merger and acquisition. Fewer and larger BFIs should lower operational cost (economies of scale), lower cost of fund, increase capital base, reduce asset-liability mismatch as long-term funds could be attracted, diversify loan portfolio, increase R&D investment, and enhance resilience to internal and external shocks. 

Prospect for Nepalese migrant workers in Japan

On December 25, the Japanese government approved measures aimed at ensuring that foreign workers under its new visa system have proper working conditions and access to support mechanism for adjustment. It includes a plan to set up about 100 consultation service centers that will provide information and services related to employment, medical services, childcare, and education. The centers will provide assistance in 11 languages. 

Earlier this month Japan’s parliament endorsed a new law to allow foreign workers in 14 industrial sectors facing acute labor shortages (thanks to declining population). The government will create two new visa categories for workers from nine countries— Cambodia, China, Indonesia, Mongolia, Myanmar, Nepal, Thailand, the Philippines and Vietnam— for employment in restaurants, hotels, nursing care, building cleaning, agriculture, fishery, food and beverage, materials processing, industrial machinery, electronics and electric machinery, construction, shipbuilding, vehicle maintenance, and airport ground handling and aircraft maintenance. 

The government expect up to 345,150 foreigners to acquire the new residency status in the first five years. There are industry specific guidelines that stipulate the maximum number of foreign workers to be accepted (60,000 in the nursing assistant sector and 53,000 in the restaurant business). No.1 type of residency status is for workers with certain level of knowledge and experience (basic Japanese language, pass language and skills test), and No.2 type of residency status is for workers with higher skills level. The first type of residency is valid for up to five years and workers will not be allowed to bring in family members to Japan (the cap on foreign workers mentioned above applies to this type of visa category). The second type of residency has no such restrictions and also doesn’t have limit on renewal of visa. Hiring for No.1 type will being in April/May 2019 and for No.2 type in 2021.

Previously, working visas were granted to people with high skills such as doctors, professors, lawyers and teachers. Workers with low skills usually came on trainee (technical interns type) visas that needed to be renewed periodically. 

It is a good news that Nepal is also included in the list of nine countries from where Japan will bring in foreign workers, which are sorely need in low skilled jobs and in rural areas facing manpower shortage (plus for the expected stimulation of economic activities in the lead up to and during Tokyo 2020 summer Olympics). Now, Nepal needs to ensure that middlemen are kept aside (usually, workers pay hefty sum to agents in Nepal and are saddled with debt for the rest of their uncertain stay and work in Japan) as it participates in the new scheme. Japanese foreign minister Taro Kono is visiting Nepal in the second week of January 2019. It will be a good opportunity to seek for an early G2G deal on foreign workers so that hiring of Nepalese workers for Japanese companies is fast, more and without much hassle. Nepal government should also work on preparing potential migrants for the Japanese market by facilitating skills and language training. Ultimately, this should help in increasing formal sector remittance flows from Japan to Nepal. 

The number of migrant workers to Japan who took labor permit from government is declining: FY2016: 3844; FY2017: 2251; FY2018: 761.

Nepal-India-Bangladesh power trade, soft loans for returning migrants and recurring banking crisis

India relaxes cross-border power trading guidelines

From The Kathmandu Post: India for the first time has given explicit recognition to the tripartite arrangement in cross-border trading of electricity, paving the way for Nepal to export surplus electricity to Bangladesh via Indian transmission lines. Introducing new guidelines on cross-border trading of electricity, the Indian Power Ministry included a provision under which two countries having a bilateral agreement with the Indian government can trade electricity between them through Indian power lines after entering into agreement with the Indian government owned-Central Transmission Utility.

While issuing guidelines on cross-border electricity trade for the first time in 2017, the Indian Power Ministry had failed to recognise a possible trilateral arrangement among two countries and India. But the recently introduced guidelines by India after withdrawing the old one issued in 2017, according to the experts, provide an opportunity to its neighbouring countries— Bangladesh and Nepal—to trade electricity between them via Indian territory.

The Indian government has also removed the discriminatory provision included in the older guidelines, under which Nepali-based hydropower projects which are owned by the Indian government or have a majority Indian share were only allowed to export power to India.

>>Here is an earlier story on the same issue. 
>> Here is the full text: Guidelines for Import/Export (Cross Border) of Electricity-2018

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Soft loan attracts migrant workers

From The Kathmandu Post: The government’s bid to retain migrant returnees has received an encouraging response with more and more workers applying for the financial assistance introduced to engage them in occupations within the country. Nearly 3,000 youths who are experienced in foreign jobs have applied for a soft loan since the scheme was launched on November 22. Under the scheme, skilled migrant workers who returned to the country within the past three years can apply for a soft loan of up to Rs1 million.

According to board officials, there have been 200 applicants for financial grants and the number is likely to surge before the December 14 deadline. Applicants can apply online or submit documents to the board office. For accessing financial support from the government, applicants should submit a clear business plan along with necessary documents certifying their experience and skill in a particular sector. However, not many candidates have submitted concrete business plans that would increase their chances of getting the support, Shrestha told the Post. A large number of applicants have only mentioned what they would be doing with the fund they will receive.

The foreign employment promotion board has sought a detailed business plan that would clearly mention how the enterprise would operate, the number of people to be involved in the business, and how the business would utilize their own skills. The board has not specified any sector in which it wants the fund recipients to invest or start their business.

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Bankers agree to bring down deposit rate

From The Himalayan Times: Owing to pressure from Nepal Rastra Bank (NRB) and the government, Nepal Bankers’ Association (NBA) — the umbrella organisation representing 28 commercial banks of Nepal — has decided to cap the interest rate on savings, individual fixed deposits and institutional fixed deposits. The NBA meeting today decided to cap interest rate on savings at 6.5 per cent, on individual fixed deposit at 9.25 per cent and 8.5 per cent for institutional fixed deposits. The NBA decision will come into effect from Friday itself. 

The banking sector started witnessing massive interest rate volatility after the commercial banks began waging an interest rate war by offering higher rates to lure depositors by ditching their ‘gentlemen’s agreement’ on interest rates three weeks ago.

Previously, NBA had agreed upon to limit interest rate on savings to seven per cent and 10 per cent each on individual fixed deposit and institutional fixed deposit. However, some banks had started accepting fixed deposits at up to 13 per cent interest rate lately after the NBA agreement was ditched. Following such instability in the bank interest rate, the central bank had directed commercial banks to bring down the interest rate on deposits.

Moreover, a study committee of the government had submitted its report to the Ministry of Finance today recommending the central bank to scrap the provision of adding 0.75 percentage point as return on assets in the formula to derive the base rate. The suggestion aimed at bringing down the base rate of banks and subsequently the lending rate. The base rate is the minimum rate at which banks and financial institutions can disburse credit to borrowers.

>>Here are two recent articles on financial sector: errant NRB, and they had it coming

>>> Here are similar ones in 2012: crisis postponed, core of banking crisis, Nepal's banking crisis explained

   

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Will the proposed new law to bypass existing procurement law accelerate project execution?

The government has drafted a new law that will allow it to bypass existing public procurement process and award projects worth Rs50 billion and above to developers through direct negotiation. 

The proposed new law allows the government to award projects to probable developer without competitive bidding under three conditions: (i) when no proposals are received during the public procurement process initiated by the authorities; (ii) when the project is based on new concept and technology; and (iii) when the estimated cost of the project is Rs50 million or more. The government will invite for competitive bidding for projects with estimated cost between Rs25 and Rs50 billion, but if only one company applies for it, then the proposed law allows the government to award projects to that company. If no company bid for projects, then government can award it directly to a potential developer. A committee chaired by the prime minister will have a final say on these projects. The committee will be represented by ministers from line ministries responsible for implementing the project, finance minister, vice chairman of National Planning Commission, chief secretary and secretary at PMO overseeing the project. 

The proposed law allows the PM-led committee to decided on the following projects: 50 km two lane road, 25 km four lane road, 2 km tunnel, international airport, 200 MW and above hydroelectricity projects, 220 KV and above transmission line, 100 km railway, 20,000 hectar and above irrigation project, 100 million and above per day drinking water project, and projects above Rs25 billion. 

Politicians and bureaucrats have been arguing for a fast-track approach to finalizing procurement for a long time. One of the core reasons why capital spending is low and spending in the last quarter or month is high is due to delay in procurement. Budget used to be unveiled in mid-July, then project authorization took another two months followed by a month or so of preliminary procurement work. Then government and project offices closed down during festival season. By the time festival season was over, five to six months already lapsed. Government awarded projects at the end of second quarter and those who won bidding of the project took some time to start work (some contractors underbid, took advance amount and forgot about finishing work on time). They felt pressure to spend fast and more towards the end of the year. They tried their best but still could not finish work. Their application for payment against physical progress is cleared in the final quarter or month. This was (and unfortunately is) the process of budget execution. 

To get out of this vicious circle of timing, (under)capacity and low spending, politicians and bureaucrats were looking for a solution.  Public Procurement Act was amended in 2016, but it didn’t work. Budget was unveiled one-and-a-half month before the start of fiscal year (it is written in the constitution now), but still it is not working as expected. Some procurement processes were cleared by the Cabinet, but still it did not work. So, the last weapon now is to bring out a law to fast-track awarding of contracts by bypassing procurement process for national priority projects. Here is a pretty detailed review of various aspects related to public procurement in Nepal. Here is an article on the reasons behind chronically low capital spending. 

Without sufficient checks and balances, it opens up avenues for foul play by politicians: awarding contract to select developers from particular country without vetting their credibility and ability to take on the task, escalate cost to ensure that it is above $500 million so that the project is governed by the new law, etc. 

The issue is not about awarding of the contract through a fast-track process. The main issue is with the preliminary work that needs to be done prior to the awarding of contract: land acquisition, financial adequacy, contract management (by both government and principal contractor), safeguards assessment and clearance (social and environmental), availability of adequate inputs for construction (raw materials, human resources, machinery, etc), and monitoring and evaluation capacity. ]

If the new law doesn't address these issues plaguing capital spending and focus on fast-track awarding of big projects to select developers, then the situation isn't going to be any different from what we are witnessing now. In fact, it might escalate true cost of project and there will be an incentive to award such project to select developers. A case in point is the 1200 MW Budhi Gandaki hydroelectricity project, which was re-awarded to a Chinese company without competitive bidding. 

Nepal India power trade, subnational government's budget execution and more

India opens door wider to electricity exporters

From The Kathmandu Post: India opened the door wider to power exporters by removing a discriminatory provision in the Guidelines on Cross Border Trade of Electricity under which Nepali-based hydropower projects which are owned by the Indian government or have a majority Indian share are only allowed to export power to India. This condition essentially bars plants built with Nepali or third country funding from exporting electricity to India, and its removal has been hailed as a major boost for Nepal’s energy sector.

According to the Energy Ministry and the Indian Embassy, the Indian Power Ministry has prepared a new draft of the guidelines minus the provision allowing only Nepali-based companies wholly owned by the Indian government or the public sector or private companies with a 51 percent or more Indian stake to sell power to India. Moreover, companies owned or controlled by the Nepal government will be able to export power to India after getting a one-time approval from Indian authorities, as per the guidelines.

According to the guidelines issued by the Indian Power Ministry in December 2016, other companies wishing to sell power to India have to obtain the approval of the designated authority on a case-by-case basis. The provision was discouraging to foreign investors and private Nepali power developers planning to build export-oriented hydropower projects with an eye on the Indian market.

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Malaysia job: Deal fails to resume worker flow

From The Kathmandu Post: Even as pressure builds on the government to resume movement of Nepalis to work in Malaysia without further delay, officials say it will take more time as both the countries are working for implementation of a bilateral deal. Nepal and Malaysia signed a much-awaited labour agreement on October 29. This was expected to resume departures of Nepali workers for Malaysia, which has been halted since mid-May. However, there has been no significant progress towards that end.

Minister for Labour, Employment and Social Security Gokarna Bista told the Post that the government was working to complete the process so that Nepalis can work in Malaysia again. “The labour deal with Malaysia was signed after years. We need to work for putting the agreement into practice. There is still some work to be done before we allow workers to migrate to Malaysia,” said Minister Bista.

According to him, joint working committees are thrashing out issues. The delay in resuming worker departures for Malaysia five weeks after signing the labour pact has irked recruiting agencies as well as political leaders from the opposition Nepali Congress.

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Provinces blame Kathmandu for dismal spending

From The Kathmandu Post: The federal government’s delay in handing over the key institutions and deputing the required number of civil servants has hit the provincial governments’ ability to spend. In the first five months of the current fiscal year, the provincial governments have spent only two percent of their budget on an average. 

The combined budget of all the seven provinces for the current fiscal year is Rs113.43 billion whereas their combined spending stood at Rs2.36 billion as of December 5. This shows that budget utilisation of the provinces is much below the federal government’s. Singha Durbar spent 20.91 percent of its total budget in the same period, according to the federal finance ministry.

The dismal spending by provincial governments comes at a time when the federal government itself is criticised for its poor spending. Provincial governments, however, blame Kathmandu for the poor implementation of the budget.“The failure of the federal government to depute necessary staff to the provinces and the frequent transfers of officials at the provinces, particularly the secretaries, are the main reasons behind the poor spending,” said Province-2 Finance Minister Bijaya Kumar Yadav. “How can budget be implemented without the bureaucracy?”

According to the Ministry of Federal Affairs and General Administration, only around 12,900 civil servants have been mobilised at the provinces against the need for 21,000.

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Govt takes over projects meant for provinces

From The Himalayan Times: The federal government has taken over some development projects supposed to be under the jurisdiction of provinces. The federal government had stated in the budget that some key development projects would be under the jurisdiction of provinces but now it has taken control of them.

The projects the federal government has taken over include:  The 10  Mid-Mountain Highway Cities, 15 linkage roads of the postal highway in Tarai-Madhes, Jhamak Kumari Ghimire foundation, nine risky settlements including in Bajura and the four municipalities of Province 7 funded by the Asian Development Bank. The  budget had stated that these projects would be under the provincial government’s jurisdiction. According to the Ministry of Urban Development, the provinces have expressed dissatisfaction with the federal government’s decision.

Spokesperson of the Ministry of Urban Development Krishna Prasad Dawadi told THT the Cabinet had decided to this effect on November 19 after consulting the federal finance ministry. “The federal government decided to take over these projects because provincial governments lacked skilled manpower and had failed to open offices to execute the projects,” he added.  He said the other reason was involvement of foreign donors in the projects and the risk of high variation order on account of delay. “The donors had also expressed concerns regarding some projects,” Dawadi added. Dawadi said the federal government would gradually hand over these projects to the provincial governments.

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