In five weeks, the country will have a new national budget for the fiscal year 2005/2006. This year, too, the finance minister will unveil his budget estimates through ordinance. The budget-making exercise, a difficult job even in normal times given the country’s severe resource constraints and the myriad competing needs, will be made even more so for the finance minister this time around, in the face of the shrinking resources and the ballooning expenses, particulary of the unproductive kind. Internal revenue generation is far from satisfactory (Rs 52 billion has been collected during the first ten months of the current fiscal year against Rs 72 billion estimated). The foreign aid scenario is not very encouraging, either, as several billions in budgetary support promised for the current year, particulary by the World Bank, has been suspended. But there is no clear sign that the situation would improve next year, given the problems on the political front. Government leaders have often tended to make the budget as big as possible, without bothering about whether the revenue and expenditure targets are realistic. Often, and particularly over the last few years, the pattern of estimated and actual figures has made things look even gloomier — much of the development budget remaining unspent, revenue falling short of the target, and regular expenditure exceeding the estimates. Not surprisingly, the realised economic growth rates have fallen behind the estimated rates.

Despite the deteriorating aborptive capacity of the economy, the security needs show no sign of levelling off. The finance minister is in no position to do anything about it. What the government should, therefore, do first is to be faithful to the people by making the budget realistic. It should not try to raise false hopes or give a false impression. It should prune less important projects, programmes and expense heads, without trying to do too many things with too little money. It should come up with ways to cut waste, but such social services as health and education should not be made to suffer. The fact that Nepal is now unable even to provide 20 per cent counterpart funds for the foreign aided projects gives an idea of the state of the national economy.