Government Introduces a Balanced Budget for Next FY

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Government Introduces a Balanced Budget for Next FY

Prithvi Man Shrestha

KATHMANDU: Amid concerns that the government would bring a large budget at a time when it is facing resource crunch, Finance Minister Barshaman Pun presented the budget for the upcoming fiscal year with a marginal increment compared to the budget of the current fiscal year.

Finance Minister Pun introduced a budget of Rs 1.86 trillion for the upcoming fiscal year, which is 6.2 percent larger than this year's budget. The budget, presented at a joint meeting of the House of Representatives and the National Assembly on Tuesday, includes a reduction in the current expenditure but an increase in capital expenses and financial management.

Many expected a populist budget, but Finance Minister Pun prioritized restraint. Pre-budget discussions suggested possible allocations for the Parliamentary Constituency Development Fund, benefits for disqualified Maoist combatants, and hike in allowances for government employees. However, none of these were included in the budget. Economic experts have noted that the budget appears cautious given the slump in economy and the government's revenue collection challenges.

Former Finance Secretary Rameshwar Khanal remarked, "The objective of maintaining economic stability is evident in the budget."

Similarly, former governor of Nepal Rastra Bank, Chiranjeevi Nepal, stated, "Despite the majority of communist parties in the coalition government, the expected populist programs are absent."

The government revised the current year's revenue collection estimate to Rs 1.253 trillion, which is 88.1 percent of the initial target. However, with one and a half months remaining in the fiscal year, the government has collected only Rs 863 billion as of Monday.

"Considering the revenue collected so far, next year's budget seems ambitious, but not excessively high," Khanal remarked.

The budget of current fiscal year was downsized by Rs 220 billion to Rs 1.53 trillion, and only Rs 1115 billion has been spent as of Monday.

"The budget seems large given our spending capabilities," added former governor Nepal.

The budget for capital expenditure and financial management has seen a significant increase. The government plans to keep revenue collection and foreign aid targets close to the current fiscal year’s budget while it plans to significantly raise domestic debt. The target for raising domestic debt next year is Rs 330 billion, up from Rs 240 billion this year. Khanal warned, "In the long run, the burden of debt on the government could widen."

Public debt has increased due to substantial borrowing for post-earthquake reconstruction and the COVID-19 response, reaching over 44 percent of GDP by the second quarter of the current fiscal year. The government allocated about Rs 246 billion for the repayment of internal debt.

Following the political change of 2046, the first stage of economic reforms led to extensive private sector development. Former Finance Minister Dr Ram Sharan Mahat initiated the second phase of reforms a decade ago, but comprehensive economic reform has not occurred. Pun announced a new phase of economic reforms aiming for high economic growth, integrated economic corridors, expansion of digital economy, and a green economy foundation. A high-level commission will be formed to make recommendations.

Reforms will target structural improvements in the business environment, public financing system, financial sector, and public administration. The private sector has long demanded a better business environment, citing unstable government policies and lack of business-friendly practices. The government promises reforms in investment laws, policy stability, investment security, country rating, bilateral investment agreements, dual tax exemption agreements.

The budget focuses on five transformative sectors: agriculture, energy, information technology, tourism, and industrial development. The period from 2081 BS to 2091 BS has been declared the Agricultural Investment Decade and Information Technology Decade. Although no specific goals are set for agriculture, the government has forwarded various new plans and continuity of old programmes. The Information Technology Decade aims to export IT services worth Rs 300 billion and create 500,000 direct jobs in 10 years.


The government has set a target of adding 900 MW of electricity in the energy sector next year, to increase the total capacity to 4,500 MW. The government also has plans to involve the private sector in electricity transmission and distribution. Tourism goals include expanding infrastructure to attract 1.6 million foreign tourists next year.

Each province is to be developed as a specialized economic center: Koshi as an industrial hub, Madhesh as an agricultural center, Bagmati as an IT hub, Gandaki as a tourism destination, Lumbini for SMEs, Karnali for herbs, and Far West as a religious tourism hub. The Gandaki economic triangle project includes Bharatpur, Butwal, and Pokhara.

Khanal views the creation of economic corridors and hubs as positive. The government targets 6 percent economic growth through this budget. However, stakeholders doubt the budget's successful implementation due to potential political instability. Former governor Nepal remarked, "Frequent government changes mean one government's budget is not owned by the next, hindering implementation. Political instability is a significant obstacle."

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