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Modern governments have a primary duty and obligation of providing social protection to their citizens.  Governments around the globe make budgetary allocations for this purpose every year. 

There is a huge gap across regions and countries with respect to budgetary allocations and coverage of population. Europe has the highest level of social security expenditure (nearly 25  percent of its GDP), followed by 21 percent in OECD, 16.6 percent in North America, seven percent in the Asia-Pacific and 4.3 percent in Africa. In sub-Saharan Africa and South Asia, social security coverage ranges from five percent to 10 percent of the population. Middle-income countries have social security coverage ranging from 20 percent to 60 percent of their respective populations, whereas in developed countries the coverage is nearly 100 percent. In the Asia-Pacific, social security schemes cover 44.1 percent of the total population of the region. 

Neighboring countries are ahead of Nepal with respect to coverage of people under social security. China has medical insurance coverage for 95 percent of its population whereas India and Bangladesh have 24.4 percent and 28.4 percent of their populations under their social security nets. But Nepal has a paltry 17 percent of its population under different kinds of social security programs. 

It is important to note here that the expenditure on social security exceeds capital expenditure in Nepal because of a low coverage of its population under social security. A trend over the years shows that the government expenditure on social security exceeds capital expenditure. This was evident in the fiscal 2021-22 and 2022-23, for example. Expenditure on social security in 2021-22 was Rs 252bn whereas capital expenditure was Rs 216bn. Fiscal 2022-23 saw a similar trend whereas in the fiscal 2023-24, Rs 253bn and Rs 234bn have already been spent under the topics of social security and capital expenditure, respectively. 

Both expenditure on social security and capital expenditure are important for Nepal’s entry into the club of middle-income countries, which is easier said than done. If Nepal desires to join the grouping of middle-income countries, its capital expenditure should exceed expenditure on social security. 

This is because capital expenditure helps increase production and productivity of the whole population, which are crucial for achieving targeted economic growth and creating employment opportunities for the masses, thereby driving the country toward prosperity and sustainability. 

Capital expenditure in Nepal leaves much to be desired as most of our rural and urban roads, which are muddy and dusty, show. Air pollution is high in the Kathmandu valley not because of the presence of industries but because of unmanaged traffic movement along highly-congested and dusty roads. Blacktopping these roads means spending capital. 

But funds for such works are hard to come by  with an increased focus on social security for targeted sections. 

Capital expenditure helps create employment opportunities for the masses, including the poor, the downtrodden, unskilled, semi-skilled and skilled youths, among others. 

Whereas expenditure on social security helps increase the consumption of targeted people such as the poor and the downtrodden, elderly citizens, malnourished children and single women. Of course, both capital expenditure and expenditure on social protection are primary duties of a modern government. 

While social protection is a must, it cannot be a substitute for capital expenditure. Thus, it is necessary to maintain discipline while spending money. Transfer of funds from one purpose to another is a common practice of the government of Nepal. 

Summing up, a government committed to social welfare and conducting development activities for sustainable economic growth must make rational decisions when it comes to spending its hard-earned capital.

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.

National Assembly (NA) lawmakers, speaking in the discussions on the principles and priorities of the Appropriation Bill for the upcoming fiscal year, called for giving emphasis on employment generation and youth mobilization by upholding good governance.

Finance Minister Dr Prakash Sharan Mahat had presented the Principles and Priorities of Appropriation Bill for next fiscal year in the meeting of the National Assembly, the upper house of the Federal Parliament, on February 26.

Taking part in the debate in the NA meeting today, lawmakers underscored on making the budget functional and on improvement in the tendency of getting the budget passed from Parliament by issuing whip, but not obeying the suggestions in the course of implementing it.

Similarly, they emphasized on giving high priority to the agriculture sector, ensuring security to the health workers, making clear the responsibilities on service delivery of the three tiers of government, bringing a plan for consumption of electricity produced in Nepal within the country itself and on also increasing capital expenditure and revenue collection.

Prakash Pantha, Dilkumari Rawal (Parbati), Dr Khimlal Devkota among other lawmakers participated in the discussions.

Dr Devkota on the occasion called attention of the government, saying those ministers who were said to participate in the meeting were not present in the meeting.

President of the Legislation Management Committee, Jayanti Devi Rai, presented the Bill on Anti-Money Laundering and the Promotion of Business Environment, 2079 BS in the meeting today.

She also presented the report of the onsite study programme on law-making process and practices of the local levels.

Government's attention drawn on making provisions for drinking water and irrigation

Similarly, the upper house lawmakers have drawn the attention of the government towards the difficulties faced by the people for lack of drinking water and irrigation facilities in the Tarai-Madhes region.

They expressed their concern on this issue while speaking in the 'zero hour' in the meeting of the National Assembly today.

Lawmaker Tulasa Kumari Dahal called on the government to make arrangements for providing pure drinking water to the people in the Madhes. She also stressed on conservation of the Chure ecosystem by stopping its over-exploitation and on making arrangements for irrigation in the Madhes which is the 'breadbasket' of the country.

Lawmaker Jaga Prasad Sharma called for putting an end to the trend of meager expenditure of the budget appropriated for big projects, drawing the government's attention to finding a solution to this problem.

Taraman Swar called on the government to expedite the construction of the Seti and Mahakali highways, considered as the backbone for the economy and development of the Sudurpaschim and to ensure budget for these road projects in the next fiscal year's budget.

Bhagawati Neupane urged the government to develop the birthplace of pioneer poet of Nepali as a tourism destination. Bimala Ghimire drew the attention of the government for immediately addressing the demands of farmers and the victims of usurious lending.

Lawmaker Sumitra BC called for immediately taking ahead the process for reconstruction of houses for the earthquake-affected people of Jajarkot who are still living under tents even after nearly four months since the disaster.

Prime Minister Pushpa Kamal Dahal has expressed commitment to making the coming fiscal year's policy, program and budget people-oriented.

During the meeting with a delegation led by CPN-UML Chairperson KP Sharma Oli at the official residence of the Prime Minister in Baluwatar today, PM Dahal shared that he was hopeful that it would bring good results as the quality change is going to be made in coming year's policy, program and the structure, timeline and process of the budget.

On the occasion, the CPN-UML had submitted a memorandum before the government after incorporating the demands put forth by the people during 'Resolution Journey for Prosperity' campaign launched by the UML from Jhulaghat of Baitadi to Chiwabhanjyang of Taplejung from November 30 to December 17.

Receiving the memo, the Prime Minister said the attention drawn by the UML on the issues of development, construction of mid-hill areas, public service and prosperity would make significant contributions in the government's policy, program and budget making.

He further said the UML's campaign has significantly contributed in protection of and strengthening the federal democratic republic.

PM Dahal also expressed commitment that the government would be seriously involved to address the possible issues presented by the UML in the memo.

Sharing that the campaign made significant contributions to understand the life of mid-hill areas, development construction, people's psychology, the situation of political collaboration, aspiration of prosperity, and its possibilities, former Prime Minister and UML Chair Oli urged the prime Minister to help address the issues incorporated in the memo.

UML office-bearers as well as other leaders were also in the delegation.

Chief Secretary Dr Baikuntha Aryal has directed various ministries and line secretaries to effectively implement budget, policies and programs for the current fiscal year 2023/24 and formulate plans accordingly.

In a meeting held at Singha Durbar on the first day of the current FY, he also directed the clearance of the arrears to effectively achieve the goals set by the government, said a secretary, who participated in the meeting.

The meeting also focused on resolving problems revolving around the bureaucracy to make it more credible, he said.

I observed that the Nepali Army allocates a significant portion of its budget toward salaries, allowances and training. This expenditure seems reasonable considering the army’s reputation and its crucial role in the country. However, prior to the Maoist insurgency, the army was smaller in size, necessitating an expansion due to the insurgency. The integration of the Maoist PLA into the NA further increased its current size to approximately 98,000 personnel.

In light of these circumstances, I have two perspectives. Firstly, shouldn’t we evaluate the current scenario? It is not necessarily a call for downsizing the army, but rather a suggestion to review and assess whether downsizing or upsizing is necessary.

Why do controversies arise when we raise military matters? These matters warrant serious deliberations and extensive research.

Considering our transition to federalism and the emergence of heightened border security threats, we may even require a stronger and larger army. 

The author is a member of National Assembly

With the government struggling to strike a balance between income and expenditure, the budget has widened further. The statistics of the Financial Comptroller General Office (FCGO) show the government’s federal budget is in deficit by Rs 422bn. 

The budget deficit has increased as revenue could not be collected as targeted while liabilities increased in areas of salary, pension, social security allowances, and domestic & external debts among others. 

According to the latest statistics of the Financial Comptroller General Office (FCGO), the government’s expenditure reached Rs 1383.55bn by July 11 while the income totaled Rs 960.83bn.

The government has been able to meet only 64.5 percent of the revenue target with only four days left to end the current fiscal year while the total expenditure has reached 77.13 percent of the annual target. 

According to Finance Ministry officials, the budget deficit may exceed Rs 5bn by the end of the fiscal year, and there is a possibility that the government treasury account will be negative by Rs 1.5bn. The government’s treasury account has already become negative by nearly Rs 1bn. According to Nepal Rastra Bank, the government's treasury account has become negative by Rs 98.85bn. 

Since the beginning of Ashad, the last month of the fiscal year, the government has stopped all large payments including Rs 80bn meant for public works. 

Such is the state that the government has used the resources allocated for capital expenditure to pay the interest on the loans. Rs 36bn was earmarked for development projects such as Budhigandaki Hydropower Project, Nijgadh International Airport, and Kathmandu-Tarai Expressway.

After the money collected from its revenue collection was not enough to pay for the salaries of the government employees and to cover the administrative expenses, the government has for the first time taken the money from the development budget and spent it to pay the interest on the loan. Rs 36bn earmarked for development projects including Budhigandaki, Nijgadh Airport, and Kathmandu-Nijgadh Fast has been transferred to pay the principal and interest of the loans.

Finance Ministry officials admitted that the amount was transferred from other titles to pay the principal and interest of the internal loans since the amount allocated for paying loans remained insufficient due to the surge in the interest rates this year. 

The dramatic decline in revenue forced the government to trim the federal budget of Rs 1.793trn by 14 percent to Rs 1.549trn through the mid-term review of the budget. 

The non-improvement in revenue collection has been a worrying factor for the government which is struggling to meet the expenses. As of July 11, revenue collection totaled Rs 940.90bn, of which Rs 818.52bn is tax revenue and Rs 86.46 is non-tax revenue.

The decline in imports has hit the revenue collection hard. According to the Department of Customs (DoC), revenue from imports has declined by 23 percent in the first 11 months of the current fiscal year compared to the same period of the last fiscal year. DoC collected revenue worth Rs 344.03bn till mid-June, which was Rs 446.79bn a year ago. 

The country’s total imports have declined by 16 percent in the review period. Nepal has imported goods worth Rs 1,480.98bn in the first 11 months of FY 2022/23 compared to Rs 1,763.22bn during the same period of FY 2021/22. 

Dhaniram Sharma, spokesperson of the Finance Ministry accepted that the budget deficit in this fiscal will be a bit bigger than in earlier years. It is seen that there will be a budget deficit this year.