KATHMANDU, Feb 28: The government has started drafting the budget for the upcoming fiscal year 2025/26. The National Planning Commission (NPC) has set a budget ceiling of around Rs 1.9 trillion. Hence, the Ministry of Finance has formed a budget writing committee to write the budget based on that ceiling. Even if the commission has set a Rs 1.9 trillion limit, some changes may occur in the figures until the budget is finalized.
The finance ministry has assigned the responsibility of coordinating the budget writing to Shree Krishna Nepal, Head of the Budget Division. The members include Head of the Foreign Division Dhani Ram Sharma, Head of the Revenue Division Uttar Kumar Khatri, Head of the Administration Division Than Prasad Pangeni, Deputy Director General of the Internal Revenue Department (IRD) Tirtha Chiluwal, and Joint Controller General Sushila Aryal.
Coordinator Nepal said that the Budget Drafting Committee is responsible for determining the principles and priorities of the budget, facilitating the prioritization of ministry-level projects and programs, preparing draft budget statements, and submitting suggestions on policies and programs.
The NPC has set a ceiling that is about 12 percent higher than the revised estimate of expenditure and revenue for the current fiscal year. The finance ministry prepares the budget within that limit. The finance ministry prepares the budget ceiling and guidelines related to budget formulation and sends them to all ministries, and the budget is prepared based on that.
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The government had brought a budget of Rs 1.86 trillion this year, which was reduced by about 200 billion through the mid-term review by Finance Minister Bishnu Prasad Paudel. According to the data of the Office of the Comptroller General, only Rs 790 billion of the current budget has been spent so far.
The budget deficit has now exceeded Rs 122 billion. As of February 25, the government has spent Rs 790 billion and earned only Rs 668 billion. The large gap between expenditure and income has added challenges to the government in preparing the upcoming budget.
According to officials from the finance ministry, a large amount has to be allocated in the upcoming budget due to the monsoon-related issues. A large portion of the budget is spent on social security programs such as pensions and old-age allowances under mandatory obligations and on foreign debt obligations.
A large portion of the budget is also spent on transformational plans and national pride projects that have been incomplete for a long time. More money is spent on social security alone than on development expenditure every year. About 20 percent of the budget has already been allocated to social security, which will have to be addressed in the upcoming budget.
Finance Ministry Spokesperson Shyam Prasad Bhandari said that the budget preparation has been started by distributing the ceiling received from the NPC ministry-wise. He said, “We are preparing the budget, the ceiling received from the planning commission has been distributed ministry-wise. Now the ministries will have to prepare their own plans and programs within that ceiling.”
According to him, if the US cuts grants, the pressure on the budget will increase further, but the finance ministry will try to find an alternative to such assistance. The target is to increase foreign grants by 22 percent and foreign loans by 30 percent to meet the ceiling of 1.9 trillion set by the planning commission. Former Executive Director of Nepal Rastra Bank (NRB) Nar Bahadur Thapa said that the budget deficit is widening and the current leadership does not have enough capacity to manage resources if foreign aid is cut.
The Ministry of Finance has provided the ministry-specific limits for current, capital, financial management and intergovernmental financial transfers and the financial transfer limits for the provincial and local levels within the budget limits received from the National Plan as per the decision of the Resource Committee. The Financial Procedures and Accountability Act has a provision to send the budget limits for the upcoming fiscal year and guidelines on budget formulation by February 27.
Similarly, the Ministry of Finance has provided the limit of equalization grants to the National Natural Resources and Finance Commission. The limit of complementary and special grants has been provided to the NPC and the limit of conditional grants to the relevant thematic ministries.
The budget has been earmarked and sent for projects of national pride and major projects. The budget guidelines include proposing budgets for quality projects and activities within the budget limits, prioritizing ongoing projects when proposing new projects, and proposing only projects for which preparations are complete and investment frameworks are assured.
