Low capital expenditure irks Parly

parliamentBy Letuka Chafotsa

MASERU — Parliament is worried that government spent more on recurrent expenses compared to its capital expenditure in the first quarter of the current financial year which began in April.

Recurrent expenditure roughly refers to short term consumption based spending on such items as travel costs, workshops, wages and salaries while capital expenditure is more about long-term fixed investments such as property and various infrastructure development projects.

The government’s skewed spending patterns are stated in a review report of the 2013/2014 first quarter budget performance analysis published last week.

Parliament said the execution of expenditure continued to exemplify major weaknesses, with recurrent and capital budgets recording 23 and four percent of the approved first quarter budget performance respectively.

The objective of the review was to assess the national budget with a view to ensure that funds were utilised in accordance with stipulated laws.

The review was also meant to determine whether all the budget projects or programmes would be achieved by the end of the financial year and to assess the capacity of the individual ministries to use public money effectively and efficiently.

Of the M5.8 billion approved capital budget, M328.2 million was scheduled to be spent in the first quarter.

However, only M256.3 million was used, the report revealed.

Several ministries had zero capital expenditure in the first quarter meaning there were no projects and programmes implemented.

Of the M8.8 billion approved for the recurrent budget, M2.0 billion out of the M3.7 billion scheduled for the first quarter was used.

The report exposes a vast shocking gap on recurrent and capital spending despite the crying need for investment in capital infrastructure in Lesotho.

Among the reasons cited for the low capital spending are inefficiencies in the department of design services within the Ministry of Public Works as well as lack of cooperation from the Ministry of Finance.

Seabata Motsamai,the executive director of the Lesotho Council of Non-governmental organisations, said the report reflected badly on the government.

“It shows that we have a government which is not results oriented”, Motsamai said.

“We have a very feeble Cabinet which does not bring the Ministry of Finance to order to enhance cooperation. This situation is intolerable if ever we want to foster growth”, said Motsamai.

Addressing these challenges was extremely critical to support both public and private sector investments and encourage broader economic participation across the country, he added.

Motsamai further said the government should aim for results based management.

Delays in disbursement of funds impede growth in the economy.

“Non-circulation of money can lead to hunger and poverty”, he added.

Majakathata Mokoena, a Harvard School of Business trained economist said, “low absorptive capacity of the capital budget can undermine the speed at which economic growth is attained.”

“Government has no multiplier effect, its low propensity to consume leads to no growth at all and the livelihoods of our people will not be improved,” said Mokoena.

“This is important to guard against deterioration in public service delivery and worsening of the livelihoods of the people,” Mokoena said.

Improvements in the implementation of the capital expenditure budget also remain vital for the country to improve the infrastructure gap for effective private sector investment required to foster sustainable growth.

The need to accelerate the provision of infrastructure in Lesotho required an immediate improvement in the performance of the capital budget, the analysts said.

“As has been noted in previous reports, not being able to implement planned projects and fully utilise the annual appropriations means cost escalations in the future”, said Mokoena.

“There is, therefore, a host of disadvantages for being unable to deliver on the budgeted capital expenditure,” Mokoena added. The fact that this was not the first time that the country had seen a low capital absorptive capacity was a major concern.

The annual fiscal report of 2012/2013 indicated that execution of expenditure continued to show some weaknesses, with recurrent and capital budgets recording 95 and 75.2 percent of the approved annual budget, respectively.

It would also help the government in delivering infrastructure at relatively lower costs by avoiding future price escalations resulting from delays in implementing approved budgets.

Although expenditure remained within approved limits, the challenge that remains is to ensure that programmes and their associated activities are delivered as planned.

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