The Ministry of Finance has acknowledged that budget expenditure has not met its target and has decided to reprioritize spending for the remaining period of the fiscal year. This decision follows a review of the first six months of the 2024/25 budget to ensure more effective implementation.

Deputy Prime Minister and Finance Minister Bishnu Prasad Poudel, while assessing the mid-term budget, stated that reprioritization is necessary to meet budgetary targets. He noted that budget execution in the first half of the fiscal year has been mixed.

The government now estimates an increase in expenditure for current, capital, and financial arrangements in the remaining months of the fiscal year. According to the Ministry of Finance, outstanding liabilities from past projects must be managed, and current expenditure should be increased within resource constraints while ensuring capital expenditure remains within desired limits. Budget reprioritization will focus on managing funds for current programs that must be utilized within the next six months by reallocating savings from other areas.

The government had to settle arrears by covering payment obligations from the previous fiscal year. To prevent a recurrence, the Ministry of Finance has decided to control the practice of shifting liabilities by avoiding excess spending in the remaining six months and deferring payments to the next fiscal year.

To curb rising current expenditure, the government has resolved not to create new organizational structures or positions in government offices, regulatory bodies, and public corporations. Expenditure standards have been set to promote fiscal prudence. Additionally, given resource constraints, 25 percent of the allocated budget for current expenditure—excluding mandatory liabilities—has been withheld.

Projects that have not yet entered the implementation phase will be postponed for the rest of the fiscal year. The government will not initiate new projects or programs without proper preparations. Instead, funds will be redirected to legally mandated liabilities, national pride projects, unfinished initiatives, and other priority programs. To optimize resources, low-priority projects with unspent budgets will be deprioritized in favor of more urgent projects.

The government also plans to reduce the number of projects and prioritize them based on necessity. Unnecessary budget sub-headings will be consolidated to an appropriate size, and small, low-cost projects of a similar nature will be merged under a single budget category. Additionally, the procurement law will be reviewed to make the system more competitive, transparent, and development-friendly. A project bank, based on specific criteria, will be established for future project allocation and prioritization.

Under Nepal’s federal governance system, Article 60 of the Constitution mandates financial transfers between the federal, provincial, and local levels to ensure the effective mobilization of financial and natural resources. These transfers are aimed at enhancing cooperation, coexistence, and coordination among the three levels of government.

For the fiscal year 2024/25, the government has allocated Rs 48.8bn to provincial and local levels as equalization, conditional, special, and complementary grants, based on recommendations from the National Natural Resources and Finance Commission. This represents a 2.2 percent increase from the previous fiscal year.