Nepal | July 07, 2020

NPC fixes budget ceiling of Rs 1,200bn for next fiscal

Himalayan News Service
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Kathmandu, April 19

It is likely that the government will be more austere in its financial plan as the National Planning Commission (NPC) has fixed a budget ceiling of Rs 1,200 billion for fiscal year 2018-19.

The apex planning body of the government has fixed the budget ceiling based on the projected revenue, foreign assistance and domestic borrowing. Out of Rs 1,200 billion, 62.3 per cent will be allocated for recurrent expenses, 25.5 per cent will be earmarked for capital expenditure and 12.2 per cent will be set aside for the repayment of debts and financing in state-owned enterprises.

The government has said that domestic sources — revenue and internal borrowing — will cover 75 per cent of the budget estimate and the remaining 25 per cent will be financed through foreign assistance in the form of loans and grants.

In the past, the governments usually presented inflated budget but expenses were always low. It seems that the government will formulate a more realistic budget in the next fiscal. Former finance minister Bishnu Poudel, who is from the ruling party CPN-UML, had heavily inflated the budget size in fiscal 2016-17. However, current Finance Minister Yubaraj Khatiwada, as per his commitment, will drop the unethical practices approved by the NPC and Ministry of Finance in the past, which were a deviation from the real budget.

Due to lack of efficient allocation, the government failed to perform in projects for which resources were earmarked without doing proper groundwork to take the project forward. As a result, progress in national pride projects are also dismal due to lack of preparedness in areas like detailed project report, environmental impact assessment and land acquisition, among other works that need to be done before starting the construction works of physical infrastructure.

In the current fiscal, as of now, total budget expenses stand at 53.67 per cent of the annual budget. Actual capital expenditure is 35.52 per cent of the annual estimate due to snail paced progress of some national pride projects such as Kathmandu-Tarai Fast Track, West Seti Hydropower and Gautam Buddha International Airport, among others.

As the country has embarked towards a federal setup, the next budget will comply with the constitutional provisions for the three tiers of the government and priorities of the current government. Aligning resources with 14th periodic plan, post-quake reconstruction activities, and the national strategy in achieving sustainable development goals (SDGs) will be focused on to achieve the country’s vision to graduate to a middle-income country by 2030.

To improve the performance of the development projects and enhance allocation efficiently, the government will apply the project readiness filter in screening the projects that will be included in budget or the MoF will discourage new projects without feasibility study/detailed project report. The government has also planned to limit foreign visit of ministers and civil servants on loan assistance. The government will not accept foreign loans without clearly specified agreements, according to MoF officials.

The next budget will take three major strategic approaches, which are enhancing growth through effective execution of government budget and initiating reforms to improve the doing business climate; accelerating investment (mainly capital investment) through
consolidation of resources and generating employment by enhancing technical and vocational education, labour market improvement and agricultural reform, infrastructure development, promoting investment in employment generating industries and service sector enhancement, as per officials.

A version of this article appears in print on April 20, 2018 of The Himalayan Times.

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