The gap between government revenue and expenditure has continued to widen in the current fiscal year, raising concerns about fiscal management. According to the Financial Comptroller General Office, which tracks government spending and revenue, total expenditure until February reached Rs 800.35bn, while revenue collection stood at Rs 690.18bn. This has resulted in a budget deficit of Rs 110.17bn.

The government’s performance in both expenditure and revenue mobilization has been lackluster in the review period. With seven months of the fiscal year already completed, only 46.9 percent of the revenue target has been achieved. While non-tax revenue collection has progressed to 58.9 percent and tax revenue to 46.2 percent, progress in grant mobilization remains alarmingly low at 17.35 percent. In the fiscal year 2024/25, the government has set a revenue target of Rs 1,419.3bn. However, it has managed to collect only Rs 671.84bn by February. 

On the expenditure side, recurrent spending stands at 48.54 percent, while capital expenditure lags at a mere 21.16 percent, highlighting the government’s inability to fund development projects. Overall financial management progress has reached 46.87 percent.

Of the total budget allocation of Rs 1,860.3bn for the current fiscal year, only Rs 800.35bn has been spent as of February. Recurrent expenditure stands at Rs 553.63bn against the target of Rs 1,140.66bn allocated, while capital spending is limited to Rs 74.57bn out of the Rs 352.35bn target. This growing gap between revenue and expenditure is complicating preparations for the upcoming fiscal year 2025/26. The National Planning Commission has recommended a budget ceiling of Rs 1,900trn for the next fiscal year. The government had initially allocated Rs 1,860bn for the current fiscal year, but Finance Minister Bishnu Poudel reduced it by approximately Rs 200bn during the mid-term review.

Despite its limited spending capacity, the finance ministry is drafting a budget of around Rs 1,900bn for the next fiscal year. Officials, led by Budget Division Chief Shrikrishna Nepal, are working on the budget under the NPC’s ceiling. However, they face the challenge of addressing the funding gap caused by the suspension of US aid. Officials say the ministry is setting ambitious targets for foreign grants and loans, aiming for 22 percent and 30 percent increases, respectively, in the upcoming budget.