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Editorial: Setting the course for new budget

Editorial: Setting the course for new budget

The government has begun preparations for the budget of the fiscal year 2024-25. The National Planning Commission (NPC) has set a budget ceiling of Rs 1.8trn for the upcoming fiscal. Minister for Finance Prakash Sharan Mahat outlined the principles and priorities of the new budget in parliament three months ahead of the budget day. The government was presenting policies and priorities of the Appropriation Bill in parliament mere two weeks before the budget day so far. This allows lawmakers more time for deliberation on the principles and priorities of the budget. The government has made significant changes in the budget process to prepare a more realistic budget.

Many economists have described the budget for the current fiscal year as ambitious, stating that the government’s success depends on its ability to manage expenditures in line with estimated resources. However, the government fell short on this front. During the first half of 2023-24, the government could mobilize only 40 percent of its revenue target, with capital expenditure progressing at a dismal 21 percent and recurrent expenditure at 44 percent. Consequently, the government was compelled to downsize the budget by 13 percent, or Rs 221bn, through the midterm review in the second week of February. This adjustment reduced recurrent expenditure to Rs 1,007.45m and downsized capital expenditure to Rs 254.13bn. During the mid-term review, Mahat acknowledged the government’s failure to achieve significant improvements despite earnest efforts to increase revenue and control expenditures.

Realizing the demographic dividend must be a priority for the government to ensure the success and efficacy of the budget for the next fiscal year. At the same time, public expenditure must be directed toward priority projects that support production growth. The government should prioritize projects ready for implementation with assured resources. On its part, the finance ministry must resist pressure to include populist programs from political leaders. The budget should aim to maintain a balance between government income and expenditure to alleviate mounting pressure on public finances. Moreover, it should strive to achieve high economic growth and job creation, and bring policies and programs to create demand in the market to give a new impetus to the economy.