Government delays development project contractor payments
The coronavirus outbreak has worsened the situation for local and foreign construction contractors following the government’s decision to phase-out their payment for five years for the work done in development projects including express highways.
The Finance Ministry has conveyed this decision to relevant companies informing them that of the unavoidable delay in project completion owing to the countrywide curfew and the resultant lockdown and after effects of COVID-19.
Unpaid claims of road contractors and contractors of other development projects as at December 31, 2019 stood at Rs.35.2 billion, Finance Ministry data showed.
Further restriction of staff to a minimum in relevant ministries and departments has delayed the assessment and certification of work and processing of payments with the cash crunch faced by the Treasury.
Several foreign funded projects have been halted temporarily as the financial allocation from the 2019 budget has been exhausted, official sources said.
In order to avoid cashflow problems and smooth functioning of utilisation of budgetary provisions, close cooperation and monitoring mechanisms with devolved agencies and line ministries are now enforced.
When implementing development activities, commitment control mechanisms will be implemented for fiscal and cashflow management of foreign borrowings.
Almost 24 per cent of the foreign financing to be disbursed during next 2-5 years is for the road and bridges sector while a considerable amount is to be disbursed for sectors such as water supply and sanitation and transport.
Payment for the work done by contractors and subcontractors of major water and road projects has been halted and this has compelled them to temporarily suspend their work.
Several foreign-funded infrastructure projects, under implementation are either delayed or suspended midway due to lack of proper coordination between various public institutions that implement such projects, a progress review report revealed.
It has been observed in the government audit that the utilisation of funds for foreign funded projects by the foreign lending institutions remained at a low level.
Physical and financial progress of many projects remained slow due to several reasons such as weaknesses in planning.
Total foreign financing disbursements made for development projects and programmes during the period throughout 2019 amounted to US$1,632.6 million. Of this, $1,607.3 million was disbursed as loans while $25.3 million was disbursed by way of grants.
The total undisbursed balance of foreign financing available from the already committed loans that are to be utilised in the next 3-5 years, was $9,688.9 million.