Budget calendar in disarray due to delayed legal amendments

KATHMANDU: The federal government’s budget formulation for fiscal year 2025-26 has hit a roadblock due to delays in amending key laws and procedures.

The National Planning Commission (NPC) and the Ministry of Finance find themselves at an impasse, hindering the progress of budget-related processes.

The NPC has postponed inviting plans and programs for supplementary and special grants from provinces and local governments, citing the lack of amendments to the Federal Supplementary and Special Grants Work Procedure.

This procedural delay stems from a decision made at the 53rd meeting of the National Development Problem Solving Committee, chaired by the Prime Minister on November 15, to revise the procedure.

Additionally, the Financial Procedure and Fiscal Responsibility (First Amendment) Bill, 2024, which is critical for streamlining the budget calendar, remains stalled in parliament. This legislative delay has left the Ministry of Finance uncertain about how to proceed with preparing the budget for the upcoming fiscal year.

Under current guidelines, the NPC is required to solicit grant proposals from provinces and local levels by mid-December and receive submissions by mid-January. However, the ongoing process revision has put these timelines on hold.

NPC Vice-Chair Prof Dr Shivaraj Adhikari acknowledged the delays but assured that the revised procedure would lead to more equitable and inclusive grant allocations.

“We aim to refine the process to ensure balanced development and address the needs of marginalized communities,” Adhikari said, adding that timelines for submitting proposals would be extended to accommodate the changes.

The amendments seek to align supplementary grants with the financial capacities of local and provincial governments and prioritize socio-economic equity. Changes to the special grants procedure will focus on promoting development among historically discriminated communities.

The issue of fixing the budget calendar has been a recurring concern in parliament. The government attempted to address this through the ‘Financial Procedure and Fiscal Responsibility (First Amendment) Ordinance, 2023,’ which allowed budget principles and priorities to be presented in parliament by mid-March. However, the ordinance lapsed before being passed into law.

To address this lapse, the government registered the Financial Procedure and Responsibility (First Amendment) Bill, 2024, in the House of Representatives on August 16. Despite this, uncertainty persists regarding whether the next fiscal year’s budget will adhere to the existing Act, the repealed ordinance, or the pending bill.

The delays have compounded administrative uncertainty, potentially disrupting the government’s ability to prepare a timely and effective budget for fiscal year 2025-26. Observers have raised concerns about the lack of parliamentary debate on budget principles and priorities, emphasizing the need for structural reforms to avoid future disruptions.

The federal government faces mounting pressure to expedite legislative processes and finalize procedural amendments to ensure a coherent and functional budget calendar.