Kathmandu, May 28

Finance Minister Yubaraj Khatiwada will present the country's first federal budget in the Parliament on Tuesday, which will transfer around Rs 400 billion to sub-national governments.

Provinces and local bodies will get around Rs 53.82 billion in revenue each from revenue-sharing fund, as 30 per cent of value added tax and domestic excise go to sub-national governments. That translates to 15 per cent each to provinces and local bodies directly from revenue-sharing fund.

The federal government will transfer around 30 per cent of the budget to the sub-national government as equalisation and conditional grant. As per the minimum threshold fixed by the National Natural Resources and Fiscal Commission (NNRFC) for the local bodies, each local unit will get no less than Rs 30 million from revenue-sharing and Rs 60 million under equalisation grant.

Due to lack of commissioners in NNRFC, the finance minister has allocated grant as per his own discretion with the help of bureaucracy of NNRFC.

Sources said Finance Minister Khatiwada has massively changed the tax rates in the budget and would encourage maximum value addition from the imports in Nepali economy.

The federal budget of 2018-19 has set a target of revenue growth of 30 per cent for next fiscal compared to 19.8 per cent growth in this fiscal. The government will mobilise around Rs 350 billion from foreign loan and grant, raise around Rs 160 billion in domestic debt based on forecast of seven per cent economic growth in next fiscal, according to MoF officials.

Based on the resource mapping, the government will present the federal budget of around Rs 1,470 billion for next fiscal, according to sources. “The budget will not exceed the threshold of Rs 1,500 billion.”

The government had presented a budget of Rs 1,279 billion for current fiscal 2017-18. However, the budget spending target was revised to Rs 1,078 billion through the mid-term review of the fiscal policy.

Finance Minister Khatiwada will introduce Madan Bhandari Highway as a new priority project of the federal government and will allocate needful resources to complete the priority projects announced through the government's policies and programmes within the stipulated time through multi-year contracts.

Khatiwada's first budget will also introduce measures to execute the projects in given time frame and give emphasis on monitoring for timely completion of development projects and for assurance of quality works..

The finance minister, however, is said to have failed to scrap the constituency development programme, which has been highly criticised from the public sphere as the programme is contradictory with the federal system and is promoting pork-barrel politics.

While presenting the principles and priorities of the budget, Finance Minister Khatiwada had said that small projects that fall under the jurisdiction of the sub-national governments will be transferred and the piecemeal programmes being run by the centre will be scrapped. However, he could not stick to his plans, according to the sources privy to the budget formulation.