new capital expenditure and lower disbursement in development...
TRANSCRIPT
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Capital Expenditure and Lower Disbursement in Development Projects
Baikuntha Aryal
Joint Secretary
Ministry of Finance
Nepal Portfolio Performance Review Meeting Kathmandu
23 April 2014
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Allocation for Capital Spending
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Some Issues
• Lower allocation
• Average allocation in total budget of 3 years is 17.2%
• Few reasons
• Recurrent expenditure getting height
• Social security costs including Pensions increasing
remarkably
• Remuneration alone covers nearly one fifth of total budget
• Classification under GFS 2001
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Allocation under GFS 2001
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Classification under GFS 2001
• Allocation in Capital spending seems lower, given all
kinds of Grants come under Recurrent heading
• Some Capital Formation spending are classified as
recurrent expenditure, typical example being grants to
Melamchi Drinking Water Project
• Investment through Financing not recorded as capital
expenditure
• All investment in NEA is for capital formation, for example
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Lower Capital Expenditure
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Some Issues
• Lower expenditure: Average spending in 3 years does not
reach 80% of allocation
• 70.7% in FY 2011/12
• 82.6% in FY 2012/13
• 86.1% in FY 2013/14 (projection based on 9 months’
expenditure)
• Capital expenditure skewed towards end of FY
• Out of total capital expenditure, 73% in FY 2011/12 and 75%
in FY 2012/13 made in last trimester of the Fiscal Year
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Capital Expenditure Against Allocation
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Capital Expenditure Spending Pattern
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Capital expenditure skewed towards the end of Fiscal Year
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Capital Expenditure under Foreign Aid
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Some Issues
• Low disbursement of foreign aid
• Only 74% of grants and 36% of loans disbursed against
allocation in FY 2012/13
• Data from DPs and MoF do not reconcile (refer NPPR,
2014 and DCR, 2014).
• For example, annual disbursement in FY 2012/13
• US$ 970 m (DP’s)
• US$ 928 m (MOF)
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Low Capital Expenditure ….Reasons
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Allocation inefficiency
• Scattered allocation
• More than 500 projects
• Resource dispersed on small projects (refer the Part II of
Program Book of NPC)
• Result orientation lacks
• DPs are not concentrated
• 508 projects had some amount of foreign aid in FY 2012/13
• UN Team is engaged in 138 projects, EU in 76 projects, ADB
in 68 projects
• Each donor is engaged in 9 counterpart agencies
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Low Capital Expenditure ….Reasons
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Allocation inefficiency
• In many cases the pre-requisites (e.g. land acquisition,
detailed designing) are not fulfilled prior to budgeting
for construction works
• Supply driven projects
• Lack of linkages among Periodic Plan, MTEF and the
annual budget
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Low Capital Expenditure ….Reasons
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Implementation problems
• Delayed activities level program approval (Remarkable
progress this FY)
• Some issues on Public Procurement Process (PPA and
DPs’ Procurement Guidelines, sometimes contradicting)
• Performance of contractors and quality of works
• Some socio-political issues
• Ineffective monitoring (too many agencies involved,
but role mismatched)
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Low Capital Expenditure ….Reasons
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Recording and Reporting
• In many instances, the expenditure are reported lately
• Reimbursement process is lengthy and often the
spending agencies are not efficient in reimbursement
• Direct Payments reporting is very poor, DPs not
reporting timely and line agencies lack the zeal to do
so (only 9% expenditure was reported after two months
of FY completion last year)
• The same issues for commodity grants and TAs
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Reporting of Capital Expenditure
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Recording and Reporting
• Delayed reporting leads to delayed financial
statement
• Confusion in actual expenditure (the capital
expenditure till 21 April is 32.3%, but excludes direct
payments and commodity grants)
• Audit is still delayed in many projects
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Initiatives Taken
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
• TSA has been rolled out in all 75 districts, enabling to
get real time expenditure data
• PFM strengthened although a lot more need to do
• MTEF revived
• Realistic projections for next two years possible
• Linkage between the Periodic Plan and budget established
• Prioritization of expenditure still an issue though
• Monitoring Guidelines prepared by NPC
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Initiatives Taken
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
• Second PEFA assessment
• Finds the ground level problem of PFM
• Assess the areas to improve
• Program approval process eased (95% programs were
approved within 3 months of the FY 2013/14)
• Early budget concept, the preparation underway for
next FY (believed to expedite the program approval
process and budget gets a whole year for
implementation)
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Initiatives Taken
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
• Digitized budget system initiated
• Line Ministry Budgetary Information System (LMBIS)
designed
• Online Budget proposal from the line agencies
• Activities level defined
• Budget allocation more realistic (demands the activities for
budget allocation, asks for necessary pre-requisites before
allocation)
• Program approval process eases
• Off budget control
• Clearer Result Orientation
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Reforms on Pipeline
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Government of Nepal
• Policy and Legal reforms
• Fiscal Responsibility Law
• Project Enforcement Policy/Law
• Sectoral policies/laws
• Prioritized expenditure
• Performance Management: Result focused expenditure
• Effective monitoring
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Reforms on Pipeline
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Development Partners
• Aligning with national priorities
• Following the Government system (still a quarter of
total foreign aid is outside the system)
• Cooperating in procurement issues, reduce the
volume of direct payments and commodity grants
• Timely reporting of all expenditures, especially direct
payments, commodity grants and TAs
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APR 2014
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Thank You
B. ARYAL
MIN
ISTR
Y O
F FI
NA
NC
E
Thank you for your kind attention !
NEPAL PORTFOLIO PERFORMANCE REVIEW 23 APRIL 2014