KATHMANDU, March 6: Amid widespread criticism of successive governments for announcing populist budgets almost every year, Finance Minister Bishnu Prasad Paudel on Wednesday expressed his commitment to implement a realistic budget for the next fiscal year.
Although the government comes up with a promise to maintain its annual financial plans within the ceiling given by the National Planning Commission (NPC) while preparing the budget, the government most of the time ends up with allocating huge amounts of funds on unimportant projects mainly due to political pressure. The NPC has recommended the Ministry of Finance (MoF) to set an expenditure ceiling of around Rs 1.9 trillion for the upcoming fiscal year 2025/26.
In a ministerial level discussion organized by the MoF on Wednesday, Finance Minister Paudel said the government will maintain fiscal discipline while endorsing the budget for the next fiscal year.
“With the endorsement of the realistic budget, the government will not have to bother to carry cash transfers for non budgetary programs while implementation of the budget will also be easier,” he said.
It has become a perennial practice to announce a big-size budget and later downsize it due to the government’s failure to spend the budget. For the current FY, the NPC had set a ceiling of Rs 1.800 trillion, while the then Finance Minister Barsha Man Pun announced a budget of Rs 1.860 trillion. Through the mid-term review, the government has reduced the budget size to Rs 1.692 trillion
Economist Keshab Acharya says that the government must stop the trend of introducing distribution-oriented and large-scale budgets. Acharya stresses on the need for improving capital expenditure capacity by the government while implementing a realistic budget.
After the NPC prescribed a budget ceiling, the government issued guidelines directing line ministries to only forward those projects that are registered in the project bank. The guidelines also state that for new projects that have not completed studies, departments should not allocate the budget for implementation. Instead, they should propose the budget only for the study and preparation work of such projects. It advises against proposing new projects and programs without ensuring resource availability.
The guidelines also recommend proposing only essential budgets for current expenses while maintaining austerity. Furthermore, when proposing projects, departments must ensure no duplication between ministries, maintain inter-agency coordination to mitigate risks based on disaster sensitivity, and prioritize post-disaster reconstruction work when proposing the budget.
According to Professor Ram Prasad Gyanwali, an economist and head at the Central Department of Economics, the practices to bring popular budgets could invite instability in the economy as it exerts unnecessary pressure to manage financial resources.
Meanwhile, the House of Representatives on Wednesday approved an ordinance related to the first amendment to Financial Procedures and Fiscal Responsibility Act. The bill talks on allowing the government to bring necessary provisions for sub-national governments to manage financial obligations outside the budget system. With the new law in place, the government will have to complete pre-budget discussions one month before the date of budget announcement.