World Bank Study Links Slow Infrastructure Development to Nepal's Economic Stagnation

Kathmandu. A World Bank study has revealed that Nepal's sluggish infrastructure development is severely hampering the country's overall economic growth and job creation.

According to the public report on Nepal's Capital Expenditure, structural problems spanning from project selection to implementation are causing a continuous decline in capital spending. The study concludes that land acquisition and tree felling are the biggest obstacles in the construction of major projects such as roads, hydropower, and irrigation in Nepal.

Citing the Nagdhunga–Naubise–Mugling road section as an example, the World Bank noted that land acquisition alone took 35 months, which is 150 percent more time than initially planned. Generally, obtaining permission for tree felling takes an average of 2 years in Nepal, and land acquisition takes up to 3 years. This increases project costs and leads to delays in realizing returns. According to statistics, the share of capital expenditure in the federal government's budget decreased from 27.1 percent in the fiscal year 2078 to 20.9 percent by 2081.

The report also questioned the malpractice of 'Asare Bikas' (development spending concentrated in the last month). It was found that over 40 percent of the total capital expenditure is spent only in Ashar, the last month of the fiscal year. This has led to a deterioration in the quality of development. According to the World Bank's estimates, if the current pace of investment and implementation continues, it will take nearly 41 years to complete Nepal's 17 'National Pride Projects'. Including projects in the budget under political pressure without adequate preparation has scattered resources, creating a situation where no project can be completed on time.

The World Bank has advised the government to prioritize projects and allocate budgets only to those that are fully prepared. The report suggests speeding up land and forestry-related processes through digital means and implementing a proportional spending system by reducing the year-end spending pressure. Furthermore, it suggests reviewing the provision of low bidding to emphasize quality and delegating authority to simplify the decision-making process.

The World Bank concludes that although the recent amendment to the Forest Regulations is positive, infrastructure development cannot gain expected momentum until other structural reforms are implemented.