Government Likely to Introduce Large Budget

  5 min 22 sec to read
Government Likely to Introduce Large Budget


KATHMANDU: The government is preparing to introduce a large-sized budget for the next fiscal year (FY 2081/82) despite resource crunch.

According to the constitutional provision, the government must present the budget in the Federal Parliament on the 15th of Jestha (May 28 this year). Finance Minister Barshman Pun is set to announce a budget of around Rs 1.95 trillion on Tuesday afternoon. Although the Resource Committee, led by the Vice Chairman of the National Planning Commission, had previously set a budget ceiling of Rs 1.8 trillion, the government has decided to introduce a budget exceeding the ceiling.

Minister Pun's budget will include several popular and ambitious plans and programs, including those from the ruling coalition's minimum common program. In recent years, the government has been reducing the size of budget during the mid-term review due to lower-than-expected revenue and constrained expenditure. For the current fiscal year 2080/81, the government initially proposed a budget of Rs 1.75 trillion, but it was downsized by Rs 220 billion to Rs 1.53 trillion through the mid-term review. As of Sunday, the Finance Controller General Office reported that the government has not even spent Rs 1.2 trillion budget allocated for the current fiscal year.

With the country facing a slump in the economy, the government has failed to meet the revenue collection target. During the mid-term review of the budget, the revenue target was reduced from Rs 1.42 trillion to Rs 1.202 trillion, partly due to decreased imports and lower revenue from customs and domestic economic activities. The government estimates the economy will grow by 3.9 percent this year.

Former Chief Secretary Bimal Koirala argues that a large budget will only increase the financial burden when the economy is weak. "I used to believe in increasing the budget size, but now, given the state of the economy and low investor confidence, it's appropriate to maintain a more moderate budget," said Koirala. He noted that increasing the budget during economic slowdowns can stimulate the economy, but this is ineffective if the government cannot spend the allocated funds.

Government officials have indicated that the budget will focus on cutting unnecessary expenses, although past expenditure reduction programs have yielded little visible results. The government has been criticized for seemingly continuing costly and unnecessary activities.

The government is likely to continue the populist program and restructure the Prime Minister's Employment Program, with employment fairs planned in all seven provinces next year. The Prime Minister's Daughter Program will also get prioritity. The budget will allocate significant funds for the Prime Minister's Daughter Program, which is managed by the Ministry of Women, Children, and Senior Citizens. Additionally, the government will emphasize national pride projects and transformative plans and announce strict implementation of project banks.

Sources indicate that due to the ongoing resource constraints, there will be no salary increase for employees, but the government is likely to increase the allowances to address their grievances. The budget will also align with the Parliamentary Constituency Development Program, although the Supreme Court had previously issued an interim order against implementing the program. Discussions are ongoing about increasing the old-age allowance eligibility from 68 to 70 years and increasing benefits for centenarians.

A high-ranking official at the Ministry of Finance revealed plans to expand the tax base, including taxing digital platform businesses and increasing taxes on luxury goods. The government is also considering higher taxes on alcohol and tobacco products. New measures, such as green taxes and IT industry concessions, will be introduced. The budget will offer income tax exemptions for startups and continue the subsidized loan program. Efforts are being made to facilitate new industry registration through a one-door system, establish Special Economic Zones (SEZs), and create industrial villages.

The budget will address issues in cooperatives and microfinance, potentially offering concessions to the borrowers. There were extensive discussions about including the provision of waiving the debts of cooperative and microfinance borrowers in the budget.

History of Budget

Historically, during Prime Minister Matrika Prasad Koirala's tenure, the then Finance Minister Suwarna Shumsher Rana introduced Nepal's first budget of Rs 52,290,000. Suwarna Shumsher established permanent government income sources like income tax and property tax, funded the introduction of Nepal's currency, set exchange rates, and established over 1,600 schools for an educational revolution.

In recent years, the government seems more interested in introducing larger budgets, often without proper implementation of the programs. For example, in FY 2068/69, Finance Minister Bharat Mohan Adhikari presented a budget of Rs 384 billion. By FY 2075/76, the budget had grown to Rs 1315 billion, and then to Rs 1793 billion in FY 2079/80. The budget for the current fiscal year is comparatively smaller, at Rs 1751 billion. Although the budget size has increased over time, the government has not been able to maintain the same pace in expenditure.


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