Govt likely to breach the budget ceiling of Rs 1.8 trillion set by NPC

Published On: May 24, 2024 09:38 AM NPT By: Republica | @RepublicaNepal

Despite slow revenue collection in current FY, govt seems firm to bring budget of over Rs 1.9 trillion

KATHMANDU, May 24: The government seems determined to cross the budget ceiling of Rs 1.8 trillion set by the National Planning Commission (NPC) for the next fiscal year.

The National Resource Estimates Committee (NREC) under the NPC has started working to revise the budget ceiling to over Rs 1.9 trillion. The committee formed under the chairmanship of Vice-Chairman of the NPC Min Bahadur Shrestha had fixed the upper threshold of the budget for the fiscal year 2024/25 at Rs 1.8 trillion on February 13.

According to an official of the NPC, the NREC is preparing to revise the limit after Prime Minister Pushpa Kamal Dahal instructed the commission to increase the budget ceiling to Rs 1.9 trillion. “In the context that the Ministry of Finance is reported to have received demand for funds of over Rs 2 trillion from various line ministries, PM Dahal seems to have fallen under pressure,” the source said.

According to the law, the NREC must fix the ceiling of the budget for the next fiscal year by mid-February every year. The government must not breach the limit given by the authority under the NPC.

In the previously set budget ceiling of Rs 1.8 trillion, the NPC aimed to generate Rs 1.27 trillion from revenue collection, while the government was expected to receive Rs 260 billion from foreign aid and grants and Rs 270 billion was to be taken from internal borrowings.

With the latest development, the NREC has raised the limit for assuming internal loans by the government to 5.5 percent from the existing 4.5 percent of the country’s GDP. It will allow the government to take internal loans of up to Rs 310 billion.

At a time when Finance Minister Barshaman Pun has been reiterating his stance of announcing the budget within the ceiling provided by the NPC, PM Dahal has been exerting pressure on the authority to breach the limit.

The government is preparing to announce the budget for the fiscal year 2024/25 on May 28 this year. The government is under pressure to curtail unproductive expenditure due to a crunch in financial resources caused by inadequate revenue collection.

The federal government is likely to collect revenue worth less than Rs 1 trillion in the current fiscal year. However, it aims to increase the revenue collection target by 29 percent to Rs 1.29 trillion in the next fiscal year.