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All seven provinces of Nepal have unveiled their fiscal plans for 2024/25, in line with the Intergovernmental Fiscal Arrangement Act 2017. A common theme across these budgets is a heavy reliance on federal grants, with a focus on infrastructure, education, healthcare, agriculture, and tourism.

The combined budgets for Koshi, Madhes, Bagmati, Gandaki, Lumbini, Karnali, and Sudurpaschim provinces total over Rs 278bn.

Koshi: Rs 35.28bn

Koshi Province aims to foster a ‘Clean, Happy, and Prosperous’ region with a budget of Rs 35.28bn. The province’s GDP is projected at Rs 903bn, with a significant rise in per capita income from $934 to $1,336. Electricity generation has increased sharply from 121 MW to 577 MW, ensuring access for 97.7 percent of the population. Priorities include agriculture, infrastructure, urban development, and energy sectors.

Madhes: Rs 43.89bn

Madhes Province has allocated Rs 43.89bn, with Finance Minister Bharat Prasad Sah designating Rs 16bn (36.45 percent) for recurrent expenses and Rs 27.89bn (63.55 percent) for capital expenses. This represents a slight 0.5 percent reduction from the previous year. The budget emphasizes education, health, agriculture, and tourism.

Bagmati: Rs 64.54bn

Bagmati Province’s budget of Rs 64.54bn marks an increase of Rs 1.83bn from the previous year. Economic Affairs and Planning Minister Jagannath Thapaliya allocated Rs 26.1bn (40.44 percent) for current expenditure and Rs 36.93bn (55.23 percent) for capital expenditure. Key sectors include education, healthcare, agriculture, and tourism. Additionally, Rs 1.5bn has been earmarked for fiscal management, and a ‘Skill Year’ program has been initiated.

Gandaki: Rs 32.97bn

Gandaki Province’s budget of Rs 32.97bn includes Rs 13.16bn for recurrent expenses and Rs 19.51bn for capital expenditures. Minister for Economic Affairs and Planning Takraj Gurung highlighted a focus on quality infrastructure, production, employment, social justice, and good governance. The province aims to collect Rs 5.17bn from internal sources and anticipates receiving Rs 7.64bn from federal financial equalization grants, among other sources. It also plans to raise Rs 1.7bn through domestic borrowing.

Lumbini: Rs 38.96bn

Lumbini Province has maintained its budget size at Rs 38.96 bn despite reduced federal grants. Minister for Economic Affairs and Planning Chet Narayan Acharya allocated Rs 11.24bn (28.87 percent) for recurrent expenses and Rs 23.58bn (63.09 percent) for capital expenditure. Funding sources include internal revenue, federal grants, and cash reserves. The province aims to collect Rs 7.51bn from internal revenue and anticipates receiving Rs 12.15bn from revenue sharing from the federal government, among other sources.

Karnali: Rs 31.41bn

Karnali Province has reduced its budget to Rs 31.41bn, with Rs 18.75bn allocated for capital expenditure and Rs 4.83bn for local-level fiscal transfers. Minister for Finance Mahendra KC stated the budget’s goal is to achieve ‘Prosperous Karnali, Happy Karnalis’. Priorities include physical infrastructure, employment programs, and cultural preservation. Notably, Rs 1.16bn has been earmarked for the Chief Minister Employment Program.

Sudurpaschim: Rs 31.62bn

Sudurpaschim Province has presented a budget of Rs 31.62bn, with Rs 11.72bn for current expenditure and Rs 17.53bn for capital expenditure. The budget aims to generate substantial revenue from internal sources and federal distribution, focusing on infrastructure development, education, and healthcare. The province aims to collect Rs 1.6bn from internal revenue and nearly Rs 10bn from revenue distribution.

‘Provinces struggle with budget cuts’

Uma Shankar Prasad, Economist and Member of National Planning Commission

Provinces face budget cuts due to limited internal revenue sources, increasing reliance on federal grants. The provincial budgets have decreased compared to previous years. Ideally, more funds should be allocated to provincial and local levels in a federal system, but in Nepal, the federal budget remains larger. This discrepancy indicates a gap between policy and practice.

‘Challenges in implementation’

Chandra Mani Adhikari, Economist

The budgets of all provinces focus on agriculture, infrastructure, and tourism, aligning with the federal budget. However, both provincial and federal levels face significant implementation challenges. Provinces struggle to increase income as the federal government retains 80 percent of major revenue sources and taxes. Grand slogans and projects are often announced without proper planning. No province has confidently declared they could spend 75 percent of their budget; in the current fiscal year, none have spent even 50 percent.

President Ram Chandra Paudel's recent visit to Switzerland and the ongoing visit to the Federal Republic of Germany are expected to be instrumental in further consolidating and renewing Nepal's bilateral ties with these European nations.

Germany offered a huge welcome and hospitality to the President and his delegation, reflecting its goodwill towards Nepal. 

The President has been on an official visit to Germany since June 15, 2024 at the friendly invitation of his German counterpart Frank-Walter Steinmeier. The two held a bilateral meeting on Monday and Germany's President assured of much support to Nepal. 

The two Heads of State reportedly reviewed the bilateral relations being based on development support, trade, tourism, investment, and vocational training in a very cordial atmosphere. President Paudel encouraged Germany to support Nepal's agriculture, tourism, and water resources sectors, highlighting them as the development priorities of Nepal.

The President departed for Germany after completing his visit to Switzerland.

President Paudel also extended his invitation to his German counterpart for an official visit to Nepal. The year of Germany's unification coincided with the year of Nepal's restoration of democracy, he recalled.

The visit is expected to contribute additionally to enhancing Nepal's diplomatic relations in the entire Europe.

Political analyst Dr Chandra Dev Bhatta said the Head of State's visit to Germany after a long gap should be considered an important one. "Of late, Nepal's official relations with Europe have not been consolidated as per the expectations and this high-level visit will help address this gap."

He advised that Nepal should take measures to promote its relations with Germany which is the world's third economic power and the most powerful nation in Europe.

"Nepal's presence in Germany and its relations with it have to be sustained as it is the world's third largest economy and a powerful European nation," he added.

In connection with this visit, President Paudel held bilateral talks on June 12 with President of the Swiss Confederation, Viola Amherd in Bern before this.

Foreign affairs expert Dinesh Bhattarai also opined that the high-level visit from Nepal after a long time will help further strengthen the climate of trust between the two countries. "Germany is Nepal's close friend. Nepal has special relations with the socialist leaders and party of Germany. Willy Brandt, the former German Chancellor and the leader of the Social Democratic Party and Nepal's popular leader BP Koirala were close friends," he added.

Stating that the visit of the Head of State in itself is meaningful and significant, former ambassador Bhattarai expressed the belief that this visit would contribute to expanding the areas of cooperation in future.

According to him, Nepal can take notable benefit from Germany through export of handicraft goods and carpet, among other goods as well as through tourism promotion.

This is the first time since 1986 that a Head of State from Nepal has made an official visit to Germany.

Dr Suresh Chandra Chalise, the foreign affairs expert to the President, expressed the belief that this visit taking place at the Head of State-level from Nepal after 38 years would contribute towards further strengthening the bilateral ties between the two countries.

He stated that the President's visit to the world's third largest economy and Europe's influential country, Germany, would help in increasing investment and trade in Nepal.

Nepal and Germany established diplomatic relations on April 4, 1958. Since then, the ties between the two countries have progressed based on friendship, mutual understanding and cooperation.

Spokesperson of the Ministry of Foreign Affairs, Amrit Bahadur Rai said that the visits taking place at various levels between the two countries would assist in further deepening the mutual relations.

"We are confident that this visit at the Head of State level will contribute in bringing German investment and technology into Nepal. Germany has made a good deal of study and practices on adaptation to safeguard from the effects of climate change, and there are many things that Nepal can learn from this as well," he said.

Bhishma Raj Ojha/RSS

Prime Minister Pushpa Kamal Dahal has urged the developed countries to help address challenges faced by the countries which missed industrial revolutions.

PM Dahal made such an urge while inaugurating the 21st replenishment meeting of IDA (IDA21) that kicked off in the federal capital, Kathmandu this morning.

The World Bank’s International Development Association (IDA) has been a committed partner in South Asia for over six decades.

PM Dahal argued that assistance to the countries lagging behind industrial development was essential for achieving the global goal of peace and prosperity. The development pace could be intensified through the concessional financial aid, according to him.

"The aid can be mobilized for just access to resources, technology and investment. Inclusive economy can be promoted by ending existing financial gaps," he reminded, adding that initiatives of sustainable development warrants support.

The Head of the Government informed Nepal was in a short supply of financial resources to meet sustainable development goals (SDGs), Nationally Determined Contributions (NDC) and sustainable infrastructures despite its efforts for inclusive economic development. The revenue constraint and trade loss are nagging problems, he reminded. Therefore, financial assistance in grants is required for Nepal to create jobs, spur economic activities and upgrade country status from LDC.

"Human capital, health, and quality education need financial resources. Quality enhancement of infrastructure and people's lifestyle are our priorities," PM Dahal said, "Digitalization, investment in productive sectors, promotion of entrepreneurship, skill development is also in focus."

The issue of food security triggered by climate change is equally worth mentioning. The achievements made so far must not be reversed. "Nepal has been advocating for climate justice along with compensation for loss and damages, for it is bearing the disproportionate effect of climate change," PM Dahal mentioned, making the participants aware of Nepal's efforts on hardships like earthquake, COVID-19 and global recession.

Moreover, Dahal believed that the IDA-21 meeting would be successful to forge a consensus among the donors and recipients on the documents of policy priorities and results for the coming three years, and make a high level resolution to address unprecedented challenges.

Nepal and other receiving countries want to see larger impacts of IDA, he reiterated.

PM's address features Nepal's potentials along with political stability like hydropower, tourism, agriculture and diligent youths. IDA is a significant development partner to Nepal. It had provided huge financial resources for the reconstruction after the 2015 Earthquake, he shared.

Senior Managing Director at World Bank, Axel van Trotsenburg, viewed the meeting will provide a guideline for mobilization of IDA resources in addition to making plans for the coming decade.

On the occasion, Managing Director at Dwarika Hotel, Sangita Shrestha, urged the development partners and policy makers to work actively for effective mobilization of financial resources that cater to sustainable development efforts.

The event attended by over 200 representatives from 61 countries including high level officials of the World Bank runs through June 21.

Prime Minister Pushpa Kamal Dahal has said the government's policies and programs for the new fiscal year are in the interests of the citizens and Nepal.

Talking to the media at Bharatpur Airport today, the Prime Minister said that overall, the budget is satisfactory. "I hope it will be endorsed by the House of Representatives smoothly."

The Prime Minister claimed that the budget highlighted several government initiatives for good governance, social justice and prosperity. "I feel that more initiatives are needed to meet the people's aspirations."

Responding to a query about the possibility of the change of Inspector General of Police, he said no such thing would happen. "This is just a rumor," he said, adding that he recently summoned chiefs of security bodies and urged them to work confidently.