Fiscal Report: Government Reserve Fund in Deep Red at Negative Rs 204 Billion

KATHMANDU: As of mid-June, the federal government’s reserve fund has plummeted to a negative balance of Rs 204 billion, according to a report by the Financial Comptroller General Office (FCGO). This significant deficit is attributed to excessive government spending coupled with lower-than-expected revenue generation during the period.

The FCGO report highlights an increase in the negative balance by Rs 23.70 billion compared to the end of the fiscal year 2022/23, when the deficit stood at Rs 181 billion.

Government receipts totaled Rs 944.59 billion, including Rs 829.03 billion from tax revenue and Rs 90.15 billion from non-tax revenue. Additionally, the government received Rs 2.75 billion in grants and Rs 22.65 billion under ‘other receipts,’ which encompass domestic and external borrowings.

In contrast, government expenditure between mid-July 2023 and mid-June 2024 reached Rs 1.181 trillion, exceeding last year’s spending by Rs 3 billion. This expenditure included Rs 822.80 billion in recurrent expenses, Rs 134.97 billion in capital expenditure, and Rs 223.50 billion for interest and loan repayments.

Officials from the FCGO warned that the government might face challenges in honoring payments if the negative reserve fund continues to widen. “As of now, the government-issued checks are cashable mainly due to funds it has which are supposed to be settled under various contexts,” noted an FCGO source.

The government has also increased domestic borrowing to Rs 235 billion in the first 11 months of the current fiscal year, an 11 percent rise compared to the same period last year. However, the government now has only Rs 5 billion fiscal space remaining for loans in the current fiscal year.

The negative balance is expected to worsen in the last month of the fiscal year, as the government typically releases a substantial portion of capital expenditure funds at the eleventh hour. So far, only 44.68 percent of liabilities have been spent on development projects.

Furthermore, the government must allocate approximately Rs 70 billion for debt servicing and manage Rs 140 billion to provide fiscal equalization and matching grants to sub-national governments, adding to the financial strain.

As the fiscal year draws to a close, the government faces mounting pressure to balance its expenditures and revenues to prevent further deterioration of its reserve fund.