KATHMANDU: The government is set to announce a significant reduction in the current fiscal year’s budget, with the total estimated decrease expected to be at least Rs 250 billion.
This decision, primarily due to challenges in mobilizing resources and managing expenditure, will be detailed in the upcoming mid-term budget review report to be released by Finance Minister Bishnu Prasad Paudel by the end of February.
In the last fiscal year, the government had initially unveiled a budget of Rs 1.86 trillion, led by former Finance Minister Barshman Pun. However, following a change in government and leadership, Finance Minister Paudel took charge and began overseeing the budget implementation starting from July 15.
The government now finds itself struggling to meet its fiscal targets due to various political, economic, and administrative hurdles.
Despite the ambitious budget set for the current fiscal year, the government has only been able to spend 36.82% of the total allocated budget, amounting to around Rs 685 billion. The capital expenditure, crucial for development and infrastructure projects, remains alarmingly low, with only 16.86% of the planned capital budget being utilized.
The government had also set a revenue collection target of Rs 1.41 trillion for the year. However, by mid-January, it had only achieved 40.01% of this goal, with total revenue collection amounting to around Rs 573 billion. These shortfalls in both revenue generation and expenditure have created a widening budget deficit, further complicating the country’s financial situation.
One of the primary reasons for the budget shortfall is the government’s inability to effectively manage its finances and reduce the fiscal gap. Minister Paudel had previously acknowledged the necessity of adjusting the budget size due to a shortage of internal resources.
Despite efforts to secure external loans, including from international agencies such as the World Bank and the Asian Development Bank, the country’s borrowing capacity is reaching its limits.
Furthermore, Nepal’s reliance on loans, especially foreign loans, has raised concerns over falling into a “debt trap.”
While the government has assured that it will only accept loans that align with national interests, the growing fiscal deficit and stagnant economic activities suggest that the country might face significant challenges in maintaining financial stability.
The government had also struggled with the implementation of a reduced budget in the previous fiscal year. Despite initially setting a budget of Rs 1.79 trillion, the government ended up cutting the budget by 12.62% due to a lack of financial resources. This year, it seems inevitable that the government will again reduce the budget size, with some estimates suggesting a cut of up to Rs 250 billion.
As Nepal faces an increasing fiscal deficit and an inability to generate the expected revenue, the country’s financial situation continues to deteriorate.
The public debt has also risen significantly, with the government seeking both internal and external loans to bridge the growing budget gap. The continued delay in development and infrastructure projects further hampers the country’s growth prospects.
Nepal’s upcoming budget will likely reflect the severe financial challenges facing the country. With reduced revenue, increasing debt, and limited spending capacity, the government will be forced to reassess its fiscal priorities and cut back on non-essential expenditure.
The reduction in the budget size is seen as a direct response to the government’s inability to mobilize the necessary resources for both current and capital expenditures.
As the mid-term review approaches, the implications of these budget cuts will become clearer, raising concerns about the country’s ability to sustain its development agenda and fiscal health in the long term.
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