With revenue affected by a slowdown in economic activities which has put pressure on resources, the government has hinted that the upcoming fiscal year’s budget will adopt austerity measures. Issuing guidelines for budget formulation for fiscal year 2025-26, which begins from mid-July, the Ministry of Finance has urged ministries to propose only essential budgets, maintaining fiscal discipline in current expenditures.
The National Planning Commission (NPC) has given a budget ceiling of Rs 1,900bn for 2025-26. The finance ministry has requested ministries to reduce current expenditures in line with the criteria for making public spending frugal and effective. Budget proposals for software purchases and consultancy services should only be made if they contribute to the development of an integrated system with adequate justification and cost-effectiveness, the guidelines read.
Ministries have also been cautioned to avoid duplication of budget programs. The finance ministry has urged other ministries to not propose any budget for abandoned projects. It has said that expenditure proposals for furniture, fixtures and decorations should be made only in essential cases.
Due to resource constraints, the finance ministry has advised that additional funds should not be sought mid-fiscal year except under special circumstances. Ministries have also been instructed to make budget allocations for service contracts for vacant positions within the approved pay scale only. “Positions occupied by employees working in other offices or outside the pay scale should not be considered vacant, and no budget should be requested for such cases,” it added.
Ministries have also been advised against requesting budgets for purchasing machinery, equipment or furniture. Budgets for vehicle purchases and foreign travel should only be proposed in essential cases, the guideline states. All ministries must submit their budget proposals for the upcoming fiscal year by March 28.
The finance ministry has requested ministries to prepare budget proposals in such a way that it minimizes the need for fund transfers and program revisions. They have also been told to propose programs based on the project classification criteria introduced last year. Ministries have been told to not include projects and programs that can create long-term liability. Likewise, ministries must propose only quality projects and programs with completed preparations and cost-benefit analysis indicating feasibility. They have been instructed to make sufficient allocations for ongoing projects expected to be completed in the next fiscal year before proposing new programs and projects.
To ensure efficient use of limited resources, the finance ministry has told ministries not to spread resources across small projects. Ministries are required to reduce the number of sequential projects and suspend non-implementable and low-priority projects. When proposing projects, ministries have to include only those projects listed in the National Planning Commission's project bank. For new projects where studies are incomplete, budget allocations should only be requested for study and preparatory works, not for implementation.
The finance ministry has said that new projects and programs should be proposed only after ensuring availability of resources. The ministries have also been told to maximize the use of available resources to fulfill periodic plans, sectoral strategies, international commitments and national development goals. “Budget proposals should comply with guidance and suggestions received from the Prime Minister’s Office, constitutional bodies and regulatory bodies, among others”.
Conditional grants and new projects
According to the guidelines, conditional grants under intergovernmental financial transfers should be reprioritized to ensure continuity of quality projects. “Sufficient funds should be allocated for salaries and other mandatory obligations of working personnel under conditional grants. For supplementary and special grant projects, budget proposals should cover liabilities created, and new projects should only be proposed for remaining amounts,” it added. “New projects should not be proposed if they contradict the criteria set by the supplementary and special grant procedures.”
Ministries and subnational governments have also been told to avoid duplication of projects and maintain institutional coordination to reduce risks by considering disaster sensitivity. Ministries have also been told to prioritize post-disaster reconstruction in their budget requests. “Projects with resource approval from the finance ministry must allocate sufficient funds to cover liabilities in the next fiscal year before proposing other projects and programs. Projects with assured resources should be reprioritized to ensure resource management,” the guidelines added. It states that budget proposals must include mandatory allocations for liabilities created by legally-incurred expenditures.
