Every year, as the monsoon kicks in, there's a feverish spurt of road-building and infrastructural development across Nepal. It has nothing to do with preparing Nepal's notoriously accident-prone roads for the rains, but with a term that is peculiar to the country: asaare bikas. The Nepali fiscal year ends in the Hindu calendar month of Asaar (around mid-July), and since budgetary allocations under capital expenditures lapse at the end of the fiscal year, government departments rush to spend whatever they can before the fiscal year runs out.
This year, the government outdid all previous records by paying out NPR 14.72 billion (USD 116 million) to various departments on a single day in July for capital expenditure. Despite the splurge, only 57 percent of the allocated budget could be spent by the end of the fiscal year – in the first six months the figure was an astoundingly low 13 percent. One can guess what the condition of roads would be if the concerned department is spending most of its allocation in a single month.
In recent months, however, Nepal's fiscal mismanagement has come under intense public scrutiny, courtesy a not-so-rosy picture of the economy. Ballooning import costs, due to Nepal's weakening rupee vis-a-vis the dollar as well as a sharp rise in global inflation, have led to a sharp decline in the country's foreign exchange reserves. There are fears – although many think it to be premature – that Nepal may head the Sri Lanka way.
By mid-May 2022, Nepal's reserves declined to USD 9.28 billion, barely enough to pay for less than seven months of imports. Inflation has touched record levels of 8.5 percent for the fiscal year 2021-22, a 70-month high, and there are estimates it will be in double-digit figures by the end of the fiscal year. The import ban on several luxury goods – such as cars, mobile phones above USD 300, and television sets wider than 32 inches – will be extended up to the end of August 2022 to arrest the outward flow of foreign reserves. A new monetary policy intends to restrict bank credit flow and limit cash supply in the market as measures to control inflation and the ballooning import bills. The state-owned petroleum supplier, Nepal Oil Corporation, has run into a massive deficit, and faces losses of over NPR 50 billion (USD 395 million) in the previous fiscal year, partly due to a rise in global oil prices. The corporation suggested several austerity measures to reduce fuel consumption, such as operating vehicles on an odd-even basis and quotas on fuel purchase. But the government is yet to act upon these recommendations, although it did include a ban on imports of Indian FMCG products, particularly of the Kurkure variety, to reduce import costs.