Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: With the Finance Ministry drafting the budget within a ceiling of NPR 19.50 trillion, it faces limited fiscal space for the upcoming financial year. The budget preparation team is under immense pressure to curb the persistent trend of fiscal mismanagement that has plagued Nepal’s economy in recent years. The ministry has already issued expenditure ceilings and guidelines to government agencies and departments.
With NPR 15 trillion allocated for mandatory obligations, there remains a high risk that ministries will propose additional financial commitments, adding pressure on the budget. This recurring pattern of excessive obligations has prompted the finance administration to adopt a stricter stance this year.
In the past, the lack of accurate financial data meant that ministries relied solely on the budget information system records, often exposing the budget to risks. However, this time, the Finance Ministry has explicitly directed all ministries to prioritize allocations for regular obligations first before proposing any new financial commitments.
Initially, budget allocations must be made for recurrent, development, and essential obligations before considering new programs. Although similar directives were issued in previous years, ministries often ignored them.
“In the past, we lacked concrete financial data. But now, we have precise records of obligations. Regardless of how many proposals the ministries submit, we can match them against our existing data,” said a senior official at the ministry.
The practice of underfunding core obligations to accommodate populist budget measures has worsened financial instability. This trend flourished due to the Finance Ministry’s leniency, but officials now indicate a low likelihood of fiscal relaxation this time.
“We have issued guidelines in accordance with laws and regulations. Whether these directives are properly followed will be closely monitored. The budget will be finalized within a strict financial framework, and programs will not be included based on political preferences,” another official stated.
However, despite initial assurances from bureaucrats, political interests often influence the budget process, leading to continued fiscal mismanagement. Given past experiences, whether the current approach will be strictly implemented remains uncertain until the final budget is publicly released.
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