KATHMANDU: Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel is set to unveil the national budget for the fiscal year 2025/26 today at 3 pm.
This will be Paudel’s third budget presentation as Finance Minister, having held the position four times in his political career.
Despite the National Resource Estimation Committee recommending a ceiling of Rs 1.865 trillion, reports suggest Paudel plans to introduce a bloated budget exceeding Rs 2 trillion. Critics allege the expansion is aimed at appeasing leaders and cadres of the ruling coalition parties ahead of future elections.
However, Paudel has drawn fire for his poor execution of the current fiscal year’s budget. Appointed on July 15, 2024, under the coalition agreement between the Nepali Congress and the CPN-UML, Paudel assumed full responsibility for budget implementation starting from the first day of the fiscal year in 2024.
The Finance Ministry under Paudel has come under heavy scrutiny for introducing an oversized and distribution-heavy budget without securing reliable sources of funding. The current trend has raised concerns about increasing public debt, rising inflation, and persistent underspending leading to “treasury surpluses.”
Poor budget execution in current fiscal year
The previous Finance Minister, Janardan Sharma, had presented a budget worth Rs 1.8603 trillion for fiscal year 2023/24. However, due to weak revenue collection and spending capacity, Paudel revised the budget down by Rs 168 billion to Rs 1.6927 trillion during the mid-year review on February 6.
As per the Office of the Financial Comptroller General, as of May 28, the government has only spent Rs 1.2923 trillion—leaving a whopping Rs 463.5 billion yet to be utilized with only 45 days remaining in the fiscal year. Against the original allocation of Rs 1.8603 trillion, this means Rs 631.06 billion remains unspent.
Even if the government accelerates spending in the final stretch—often criticized as “Assare Bikas” or rushed rainy-season development—experts say the total expenditure may barely reach Rs 1.5 trillion. Last fiscal year, the government only managed to spend Rs 1.4089 trillion.
Widening fiscal deficit and rising debt
Minister Paudel began the fiscal year with a projected deficit of Rs 547.67 billion. However, as of now, the Ministry has only been able to spend 66% of the total allocated budget. The actual fiscal deficit currently stands at Rs 233.33 billion. The government has spent Rs 1.2923 trillion from the treasury while revenue collection stands at just Rs 995.9 billion, excluding loans.
Capital expenditure—a crucial indicator for economic growth—remains critically low. Of the allocated Rs 352.35 billion for capital spending, only Rs 130.89 billion has been spent, representing just 37.15% execution.
The government had initially targeted to collect Rs 1.4193 trillion in revenue. So far, only 68.19% of this goal has been achieved. As of Wednesday evening, total revenue collection stood at NPR 967.82 billion.
Breaking this down, tax revenue collection reached Rs 872.3 billion out of a target of Rs 1.2842 trillion while non-tax revenue collection reached only Rs 95.52 billion against a target of Rs 135.09 billion.
Foreign grants also fell significantly short of expectations. Of the Rs 52.32 billion projected in grants, the government has received only Rs 16.62 billion so far.
Public debt reaches new heights
The government appears increasingly reliant on debt to bridge the fiscal gap. According to the Public Debt Management Office, Nepal’s total public debt stood at Rs 2.434 trillion at the beginning of this fiscal year. By the end of Baisakh (mid-May), the figure had ballooned by Rs 188.3 billion, bringing the total to Rs 2.622 trillion.
The government had targeted to raise Rs 547 billion in public debt this fiscal year. As of Baisakh end, it had already borrowed Rs 390.83 billion—71.41% of the annual target. If current trends continue, Nepal is on track to set a new record for annual public borrowing by the end of Asar (mid-July).
Comment