Kathmandu, February 22
The size of the budget for the upcoming fiscal year 2083/84 will decrease compared to the current fiscal year.
The National Resource Estimate Committee has set a budget ceiling for the next fiscal year slightly lower than the size of the ongoing budget and submitted it to the Ministry of Finance. According to sources at the ministry, the limit has been fixed between Rs 1.89 trillion and Rs 1.94 trillion.
The government is currently implementing a budget of Rs 1.964 trillion for the fiscal year 2082/83. Vice Chair of the National Planning Commission, Dr Prakash Kumar Shrestha, said efforts to curb the tendency of unnecessarily inflating the budget size have begun from the stage of determining “available resources and feasible expenditure limits.” The ceiling has been fixed accordingly, he said.
As per legal provisions, the National Resource Estimate Committee, led by the vice chair of the commission, is required to provide the expenditure ceiling to the finance minister. The government is implementing a budget of Rs 1.964 trillion in the current fiscal year. However, a mid-year review has already revised the estimated expenditure down to Rs 1.688 trillion.
“Repeatedly introducing large budgets at the outset and failing to spend them has raised questions about the efficiency of the state mechanism,” Dr Shrestha said. “An attempt has been made to control this tendency at the time of fixing the ceiling.”
For a long time, actual expenditure has consistently fallen short of mid-year revised estimates.
Dr Shrestha informed that, as in previous years, the committee has earmarked and ensured budget allocations for national pride projects while fixing the ceiling. Adequate funds have also been allocated for incomplete projects. He added that the limit was determined with guidelines aimed at accelerating priority projects and programmes of the state.
In Nepal, the Appropriation Bill and the budget preparation process are governed by the Financial Procedures and Fiscal Responsibility Act. As per the Act, the committee must submit to the finance minister, by the first week of Falgun, the medium-term expenditure framework along with the projection of available resources and the limit of feasible expenditure for the upcoming fiscal year.
Accordingly, the committee submitted its report, including the budget ceiling, to Finance Minister Rameshwar Khanal this week.
According to sources at the Ministry of Finance, revenue collection for the next fiscal year is projected at around Rs 1.332 trillion. The committee has set a revenue target equivalent to 18.5 per cent of the projected gross domestic product (GDP) for the upcoming fiscal year. Based on this, GDP is estimated to reach around Rs 7.2 trillion. The ceiling has been fixed so that the budget size remains at 27 per cent of GDP.
Space kept for new government
The current fiscal year’s budget was unveiled by a government led by the Communist Party of Nepal (Unified Marxist–Leninist). After the government collapsed following the Gen Z movement on Bhadra 23 and 24, an interim government was formed, which continued implementing the same budget.
There was a lack of alignment between the priorities of the party-led government that introduced the budget and those of the interim government. As a result, this year’s budget targets could not be achieved as expected.
Amid such circumstances, the resource estimation has also had to be carried out by the interim government. However, following the House of Representatives elections scheduled for Falgun 21, a newly elected government will assume office. The Resource Estimate Committee has fixed the estimated budget size while keeping adequate space for the incoming government.
This is because, based on the current fiscal year’s budget, the Medium-Term Expenditure Framework (FY 2082/83–2084/85) had projected the budget size for fiscal year 2083/84 at around Rs 2.128 trillion.
According to Dr Shrestha, the ceiling has been determined after evaluating revenue collected in the first six months of the current fiscal year, as well as the mobilisation of foreign loans and grants.
However, if the new government introduces improved strategies, there remains the flexibility to revise the ceiling and present a larger budget. There is a constitutional provision requiring the upcoming fiscal year’s budget to be presented on Jestha 15.
Trend of announcing large budgets without spending capacity
In Nepal, political parties have a tendency to introduce large-sized budgets to attract public support, but often fail to implement them effectively.
For the current fiscal year as well, the government has estimated in its mid-year review that only 85.96 per cent of the initially allocated budget will be implemented.
The revised estimate projects Rs 1.125 trillion in recurrent expenditure and Rs 243 billion in capital expenditure this year. Financial management expenditure is estimated at Rs 319 billion. However, the original allocation stands at Rs 1.18 trillion for recurrent expenditure, Rs 407 billion for capital expenditure and Rs 375 billion for financial management.
On the revenue side, it has also become clear that the government’s income will fall short of the target. While the original estimate projected revenue of Rs 1.48 trillion for this fiscal year, the mid-year review has revised it down to Rs 1.298 trillion.
