Provincial governments struggle with budget spending: concerns raised over fiscal inefficiency and operational competence

KATHMANDU: As concerns mount over the provincial structure contributing to increased national expenses, questions are arising about the effectiveness of provincial governments. All seven provincial administrations have encountered challenges in utilizing their allocated budgets, sparking doubts about their operational capabilities, according to experts.

The recently released half-yearly evaluation report from the Ministry of Finance indicates that Madhesh Province spent only 6.68 percent of its budget during the first six months of the fiscal year 2023/24. The review highlights the provincial government’s pronounced weakness in expenditure.

The Financial Comptroller General’s Office reveals that a mere Rs 43.25 billion out of the budget allocation of Rs 280.11 billion was spent collectively by the seven provincial governments in six months, representing only 15.44 percent of their total budget.

In comparison, the federal government spent 32.75 percent of its budget during the same period. The provincial governments’ expenditure is less than half of the federal government’s, raising concerns about their fiscal efficiency.

Several factors contribute to the government’s inability to spend, including poor coordination between government agencies, a lack of manpower, employees hesitating to advance files due to fears of irregularities, and an unstable political environment.

Balananda Poudel, Chairman of the National Natural Resources and Fiscal Commission (NNRFC), emphasizes the need to improve efficiency, given the low expenditure by provincial governments. He acknowledges complaints about work being done without corresponding payments and suggests an increase in spending capacity.

The failure to expend funds hampers the progress of development work, with capital expenditure, or the development budget, particularly weak. Over the past six months, provincial governments have managed to spend only 11.44 percent of their capital expenditure.

Ram Krishna Pudasaini, Secretary of Madhesh Province, attributes the low expenditure to delays in development work and expresses concern that despite timely budget allocation, funds could not be spent.

Despite the adoption of federalism and the formation of seven provincial governments, criticism persists, challenging their ability to demonstrate their worth through effective work. The chief ministers of the provinces have struggled to showcase their competency, despite assertions from the federal government about the devolution of powers.

Madhesh Province emerges as the weakest in terms of spending capacity, utilizing only 6.68 percent of its budget. Koshi Province reported the highest expenditure at 20.87 percent, albeit 11.88 percent less than the federal government’s expenditure. Other provinces fall within this range, reflecting a shared challenge in executing budgets effectively.

Provincial governments’ implementation of small schemes encounters difficulties due to their failure to develop comprehensive plans before budget implementation, resulting in limited expenditure.