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Prime Minister Pushpa Kamal Dahal has been stating in various forums that a budget of up to Rs 1.9trn would be needed for the fiscal year 2024/25.

The private sector, meanwhile, has been saying that a larger budget would have an adverse impact on them. Speaking at a pre-budget roundtable recently, business leaders said a large budget size will put pressure on resources, and as revenue and tax rates will have to be increased for this, ultimately the private sector will have to bear the brunt. They said that the government should bring a budget that can be implemented rather than focus on its size. In their suggestions to the finance ministry, which is preparing the budget for the upcoming fiscal year, they have requested the government to not exert pressure and dampen the morale of the private sector.

Rajesh Kumar Agrawal, President of the Confederation of Nepalese Industries (CNI), said that if the government focuses on a large budget, it will put pressure on the private sector. “This will help neither the government nor the private sector,” he added. “A wrong narrative is being created that credit extended to the private sector is being misused. This should be corrected.”

Likewise, Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), urged the government to bring a budget that can be implemented. “Since we recently held the 2024 Nepal Investment Summit, the coming fiscal year should be taken as the beginning of the investment decade. It seems that the monetary policy was not in sync with the budget. As a result, the government is not being able to achieve what it intends to achieve,” he added. Likewise, Nepal Chambers of Commerce (NCC) President Kamlesh Agrawal requested the government not to increase tax rates that would put an additional burden on the private sector. “Rising tax rates alone do not guarantee revenue growth. It can encourage smuggling,” he added.

Sunil KC, president of the Nepal Bankers’ Association, complained that construction entrepreneurs have been adversely affected as the government has not increased the size of capital expenditure which has ultimately led to an increase in bad loans in banks. “The construction sector accounts for the highest non-performing loans (NPLs) in the banking system. This situation has arisen because the government failed to make capital expenditures,” he added.

Likewise, Upendra Prasad Paudyal, president of the Bank and Financial Institutions Association of Nepal (BFIN), said NPL levels in the banking system can be controlled if the government is flexible towards the construction sector. “The government should encourage construction even by issuing bonds if needed. If that sector rises, NPLs will decrease, and other sectors will also improve,” he said.

On the other hand, Ganesh Karki, president of the Independent Power Producers’ Association (IPPAN), suggested that the budget give special priority to the hydropower sector, as hydropower construction not only generates electricity but also builds roads, triggers market expansion, and creates employment simultaneously.Similarly, Karan Kumar Chaudhary, president of the Nada Automobile Association of Nepal, complained that the government has forgotten the automobile sector. He said that the automobile sector has fallen victim to double taxation.

Economist Prof Dr Achyut Wagle suggested making bold decisions and showing courage for reforms, as the sectors traditionally considered the backbone of the economy are currently facing problems. “Nepal is falling behind as it has failed to identify and develop potential sectors. There is a need to explore new revenue sources,” he added. Likewise, Resham Thapa, head of the Department of Economics under Tribhuvan University, said local units shouldn’t be undermined while preparing the budget.

The government is aligning the budget for the fiscal year 2024/25 with the policies outlined in the 16th National Plan, the strategy set for graduation to a developing country in 2026, the sustainable development goals 2030, and the need to create a basis for sustainable and comprehensive economic growth.

Presenting the principles and priorities of the Appropriation Bill in the House of Representatives on Tuesday, Minister for Finance Minister Prakash Sharan Mahat said that the upcoming budget will primarily focus on bolstering production and productivity through increased public spending on prioritized projects.

Pre-budget discussions have begun in the House of Representatives three months ahead of the budget day, scheduled for May 28, this year. Earlier, the government used to table the principles and priorities of the appropriation bill 15 days prior to the budget day. The government amended the provision by bringing an ordinance.

The government is putting focus on strengthening the financial sector. Minister Mahat, in the principles and priorities document, has expressed commitment to enhance the efficacy of regulation and supervision in the financial sector, with the aim of developing a robust, competitive, and dependable financial landscape. Additionally, the government has promised to enhance the professionalism of regulatory bodies overseeing banks, financial institutions, microfinance, insurance, and the share market, while also prioritizing transparency and accountability.

The budget principles revolve around sustainable and inclusive economic growth, balanced public finance, efficient budgetary allocation, social sector development, social justice, private sector promotion, federalism, good governance, sustainable development, and climate change.

Moreover, the government has identified hydropower development, modernization and commercialization of agriculture, development of tourism and IT sector, infrastructure development, social sector upliftment, green development, disaster management, harnessing demographic dividends and youth mobilization, strengthening of the financial sector, upholding the rule of law, and fostering international cooperation and relations are the priorities of the government.

Speaking in the House of Representatives, Minister Mahat said that the new budget will prioritize high growth rate while maintaining macroeconomic stability and enhancing the living standards of citizens. “The budget will be tailored to elevate the country’s economy to the standards of the global economy and improve the livelihoods of those struggling to meet their basic needs,” Mahat added. He insisted that the country's economy is moving in a positive direction. 

“The increase in electricity generation and tourist numbers as well as the rise in foreign investment have contributed positively to the economy. There is sufficient liquidity in the banking sector and the interest rate is falling towards single digit,” Mahat said. “Although the revenue collection is not as per the target, the growth rate is around 10 percent. I am confident that it will increase further in the coming days.”

Furthermore, the budget will focus on mobilizing government resources for sustainable and inclusive economic growth, channeling investments into critical public infrastructure sectors such as energy, agriculture, tourism, and information technology. Efforts will also be directed towards facilitating private sector investment to stimulate production, productivity, and job creation domestically.

To ensure the efficient allocation of public expenditure, the government has said that it will prioritize projects based on pre-assessment and completion criteria and ensure that priority projects won’t face dearth of resources. 

Moreover, the government has said in the policies and priorities document that it would increase revenue mobilization through business and investment-friendly taxation policies and allocating public resources towards service delivery, socio-economic infrastructure development, and human capital enhancement. Likewise, the government has said that it would eliminate duplication in subsidies and benefits by focusing resources on target groups, while also implementing necessary policy, legal, and institutional reforms to foster a conducive environment for domestic and foreign investors, notably through the Nepal Investment Summit scheduled for April 2024.

Furthermore, the government has said that it would streamline public service delivery, making it more citizen-friendly and aligned with federal norms and values. Likewise, it plans to focus on increasing electricity generation through domestic and foreign investments, thus promoting a green economy by boosting domestic electricity consumption.

The government said in the policies and priorities document that it would develop Nepal as a premier tourism destination by resolving operational obstacles at Pokhara and Bhairahawa airports, initiating the construction of Nijgadh International Airport, and ensuring timely completion of strategic projects such as the Kathmandu Tarai Madhes Expressway and crucial highways. Likewise, the government has said that it remains committed to advancing the health insurance program, promoting youth-centric entrepreneurship, and fostering domestic employment opportunities to mitigate the need for youth migration abroad for employment.

Capital expenditure is not gaining momentum this year as well. Only 19 percent of the capital budget has been spent even though six months of the fiscal year have already passed.

Amid this backdrop, the government has begun preparations for the budget for the fiscal year 2024/25. Experts say unless a systemic change is made in budget implementation, all these lengthy preparations for the budget will yield no result.

Out of the Rs 302.07bn allocated for capital expenditure in the current fiscal year, only Rs 57.74bn have been spent so far. Slow capital spending has affected the overall economic cycle in the country. Cash flow to the market has been affected. As a result, manufacturers of cement, steel, and other construction materials, as well as laborers, have been affected. Banks are awash with loanable funds. Interest rates too have come down. But new demands for loans are not coming.

On the other hand, the government hasn’t been able to meet revenue targets. The government has set a target of raising Rs 1,422.54bn in fiscal year 2023/24, which ends in mid-July. But it has mobilized only Rs 549bn till the end of January.

Although the external sector of the Nepali economy has improved of late, the economy continues to see pressure on internal sectors, economists say. The share of exportable goods to total trade has come down as factories are running below capacity. The share of imports, as a result, has reached 91.11 percent in Nepal’s total trade. Since imports have also come down due to a fall in demand, the government’s revenue has been hit.

The National Planning Commission (NPC) recently completed discussions with ministries on their priorities and programs for the fiscal year 2024/25. “The ministries have been told to bring programs based on the 16th National Plan document. Since it will be the first fiscal year of the 16th Plan, the ministries should make a policy departure to incorporate basic tenets of the plan,” Ramesh Paudel, a member of the NPC, said.

According to Paudel, the NPC would provide a budget ceiling for ministries after studying their proposals. “We will also get the idea of resources by holding discussions with the Revenue Advisory Committee. We will take resources available to us into consideration while setting a budget ceiling for ministries,” he added.

Economic expert Dilli Raj Khanal said the NPC should set up a division to analyze allocations made to ministries, actual budget spent, and the income and expenditure pattern. “The budget-ceiling process looks like mere ritual. This is because the actual budget is entirely different from what the NPC estimates,” he added. “The credibility of the overall budget is losing due to the tendency of spending the budget in the last month of the fiscal year. This is happening because of haphazard budget allocation and the tendency of powerful people selecting programs without rationale.”

Another economic expert, Chandra Mani Adhikari, said since ministries select programs and priorities based on the ceiling provided by the NPC; NPC should set the ceiling at the earliest. “Since capital spending is not picking up, there is a need to change the budget system and working style, and hold the people responsible for this accountable,” Adhikari said. He also said NPC should discourage ministries from entering unfeasible projects in its project bank. “Only the projects ready for implementation and for which resources are guaranteed should get priority in the budget,” he said. “Also, NPC should clearly state that implementing agencies will be held responsible if projects are not implemented as per the schedule.”

Dhaniram Sharma, the spokesperson for the finance ministry, said he was confident that the capital budget would be spent in the remaining months of the fiscal year. “Slow spending is due to shortcomings in prioritizing projects. That is why the ministry has prepared a standard for the classification of the budget based on their priorities,” he added. “It controls small projects. We will strictly enforce the standards in the coming fiscal year.”

Since ministries can’t propose programs having a budget of less than Rs 30m, Sharma said the number of small projects will go down considerably. “This will, in turn, increase public spending,” he added.

The ministry has also prepared standards for tendering for multi-year projects. As per the standards, such projects should be tendered by mid-October. The standards will also come into operation from the next fiscal year.

The finance ministry has already held the first round of discussions with the ministries on the upcoming budget. “We will hold the next round of meetings after the NPC sets the budget ceiling,” Sharma added.

The government has managed to spend around 20 percent of the budget allocated for 2023/24 in the first four months of the fiscal year.

According to the Financial Comptroller General’s Office (FCGO), the government has spent Rs 355.63bn out of Rs 1,751.31bn allocated in the current fiscal year.

The government has so far expended 23.75 percent of its recurrent budget, 9.93 percent of the capital budget, and 17.72 percent of its budget allocated for financial management.

Out of the total budget, Rs 1,141.78bn has been set aside for recurrent expenditure, Rs 302.07bn for capital expenditure, and Rs 307.45bn for financial management in the current fiscal year.

According to the FCGO, the government has spent Rs 271.17bn of its recurrent budget. Likewise, Rs 29.98bn of the capital budget has been spent so far, while it has spent Rs 54.46bn of the budget allocated for financial management.

The government uses funds allocated for financial management to service its domestic and foreign debt.

In the current fiscal year, the government has allocated more budget for financial management compared to the capital budget.

Looking at the government spending over the first four months, spending toward financial management is more than double of what the government has managed to spend toward capital spending. This means the government's spending toward servicing foreign and domestic debt is higher than what it is spending on development works.

The government's capital spending gains momentum in the fourth quarter as implementing agencies often initiate projects at the eleventh hour to avoid budget freeze. Spending taxpayers' money in this manner is incorrect because a substantial portion of these payments occurs without adherence to proper processes and legal mandates. This compromises the quality of work. Such spending is often done in collaboration among implementing agencies i.e. government offices, contractors and suppliers.

During the first four months of 2022/23, the government's total spending stood at Rs. 351bn. Recurrent expenditure, capital expenditure, and financial management expenditure amounted to Rs 281.39bn, Rs 26.30bn, and Rs 43.31bn, respectively, in the review period.

The government mobilized 20.08 percent of the revenue target set for the current fiscal year in the first four months of 2023/24. Out of Rs 1,422.54bn that the government is looking to raise in the current fiscal year, the government mobilized Rs 276.64bn in the first four months. Of the total revenue, Rs 254.30bn is from tax revenue, and Rs 22.33bn is from non-tax revenue.

Likewise, the government has managed to mobilize Rs 3.75bn as foreign grants in the four months of 2023/24. This is 5.42 percent of Rs 49.94bn that the government is looking to raise under foreign grants in the current fiscal year.

Medical experts have expressed concerns about the challenges in providing quality healthcare, citing that the budget allocated to the health sector for this fiscal year is not enough.

The government has allocated a health budget of Rs 83.99bn, which is lower than the sums allocated in the previous two fiscal years. In the fiscal year 2021-22, the Ministry of Health and Population received an allocation of Rs 122.77bn. The figure was Rs 90.69bn for the fiscal year 2020/21. 

The government has decided to make healthcare accessible and qualitative to all. It has also pledged to expand public access to specialized healthcare, and prioritized the prevention, control and treatment of Covid-19 along with other infectious diseases. Funds have also been allocated for the prevention of dengue, malaria, kala-azar, encephalitis, and other seasonal and insect-borne diseases.

As per the plan to treat and prevent infectious diseases, the government has announced plans to upgrade Sukraraj Tropical and Infectious Disease Hospital into a 300-bed facility. A Rs 460m plan has also been outlined for the construction and operation of provincial communicable disease hospitals in Pokhara, Surkhet, Doti, and Bharatpur. A budget allocation has also been announced to upgrade all provincial hospitals into teaching hospitals with super-specialty facilities. 

But health experts say the ambitious plan announced by the government to improve the country’s health sector and the budget earmarked do not complement each other. Many of the plans, they say, also seem rushed and overlook some crucial aspects such as hiring medical professionals and training them.

 “If the government wants to upgrade and operate infectious disease hospitals, then it must recruit specialized human resources and train them,” says Dr Anup Bastola, tropical and infectious disease expert. The recruitment and training parts do not figure in the budget.  

The government has also earmarked Rs 1.28bn to provide 98 types of medicines, vaccines, and basic health services free of charge from primary health service centers in 6,743 wards throughout the country. 

“Instead of purchasing medicines, the government should focus on maintaining quality healthcare,” says Dr Ajay Kumar Jha, Consultant Hematologist, Vayodha Hospital.

The government has also decided to give continuity to the provision of Rs 5,000 monthly medical allowances to individuals who have undergone kidney transplantation, are undergoing dialysis, have been diagnosed with cancer, or have spinal paralysis. The scheme was introduced in January 2018 by the government led by Sher Bahadur Deuba. It was briefly discontinued by the KP Oli led government.

Likewise, Rs 2.50bn has been allocated to continue grants for the treatment of heart disease, kidney disease, cancer, Parkinson’s disease, Alzheimer’s disease, spinal injuries, head injuries, and sickle cell anemia to poor citizens.   Some health experts and medical professionals like Dr Jha are of the view that a distributive approach to healthcare budget is no way to improve Nepal's health sector. 

“It would have been better to strengthen the services rather than distributing monthly allowance to the patients,” says Dr Jha. Arrangements will be made to provide kidney transplantation services at all provincial hospitals as per the Finance Minister Prakash Sharan Mahat. 

“If the government can provide such services in all the federal hospitals then it will help patients to seek the health care in their hometown. Additional financial burden of the patients will be lowered and crowds in hospitals in the federal capital will also be decreased,” says Dr Jha.

The government has also allocated Rs 820m to purchase health equipment for 100 hospitals that are set to be completed next year. Again, another myopic plan that could end badly, say health experts, pointing out to the fact that many expensive health equipment remain unused in hospitals and other health facilities due to a lack of proper space for their installation and untrained human resources to operate them   

There is also an allocation meant for procurement of medical equipment and and infrastructure development for BP Koirala Memorial Cancer Hospital, GP Koirala National Center for Respiratory Diseases, Sushil Koirala Prakhar Cancer Hospital, Manmohan Cardiothoracic Vascular and Transplant Center, Suresh Wagle Memorial Cancer Hospital, Ramraja Prasad Singh Academy of Health Sciences, and Bhaktapur Cancer Hospital. In addition, Rs 8bn has been announced to give continuity to the construction of 5-, 10-, and 15-bed hospitals in 322 local levels across the country. 

Dr Dipendra Pandey, consultant orthopedic surgeon, Koshi Hospital, says with an allocation going for healthcare infrastructure development, there is also a need for health professionals to run them, an issue that the government didn’t address while announcing the budget.  

“The government has talked only developing healthcare infrastructure, but has not said anything about human resources,” he adds.

The government has also announced that special programs will be conducted to save the lives of mothers and their newborn in areas with high infant and maternal mortality rates, but health experts say such programs must be run across the country.

According to Nepal Demographic Health Survey 2016, maternal deaths are a subset of all female deaths. They are defined as deaths that occur during pregnancy or childbirth, or within 42 days after the birth or termination of a pregnancy, but are not due to accidents or violence. The maternal mortality ratio for the period 2009-2016 is 239 deaths per 100,000 live births. About 12 percent of deaths of women, age 15-49, are maternal deaths, the survey reports.

“In order to prevent maternal and infant deaths, the government must come up with plans to deliver maternity services from all health institutions. It should not be limited to a few ones,” says Dr Manor Din Shaiyed.  He is of the view that the healthcare allocation should be at least 10 percent of the total budget. 

To make the geriatric wards in government hospitals more effective, the government has announced plans to set up necessary arrangements for screening and treatment of age-related diseases, including dementia, and Alzheimer's disease, in coordination with the nearest specialized hospital. Similarly, Rs 1.15bn has been set aside for the “Tuberculosis-free Nepal Campaign” to identify patients and provide free distribution of medicine.

The government has also said that Geta Medical College will be operated as the Shahid Dashrath Chand Institute of Health Sciences. A budget has been allocated for infrastructure construction, equipment purchase, and manpower management to upgrade Geta Hospital into a 100-bed facility. A budget has also been allocated for the development of infrastructure to expand the services of Rapti Academy of Health Sciences. Plans and budget have also been announced to initiate the process of establishing a 100-bed satellite hospital in Rakam, Aathbis Municipality, Dailekh under the Karnali Institute of Health Sciences.

Allocations have also been made for the capacity expansion of the National Trauma Center, and setting up primary trauma care centers in Lamki, Kailali; Saljhandi, Rupandehi; Bardaghat, Nawalparasi West; Gaindakot, Nawalpur; Bhiman, Sindhuli; and Belkhu, Dhading.

The government has also announced plans to make arrangements for specialty doctors who have completed their MD and MS under state scholarship programs to serve in government hospitals outside Kathmandu Valley. 

To improve the quality of health services, Rs 240m has been allocated for the implementation of the “one-doctor, one-hospital” program. 

Dr Pandey, from Koshi Hospital, says the government has come up with a list of plans in the name of improving the health sector and healthcare accessibility, but has not announced any program to encourage health professionals. 

“There are no proper plans to stop health professionals from migrating to foreign countries for better opportunities. Construction of hospital buildings and adding medical equipment alone is not enough.”

Sudurpaschim Province Government has failed to utilize Rs 11bn of the budget allocated for the fiscal year 2022/23.

Out of the total allocation of Rs 35bn in 2022/23, the provincial government could spend only Rs 24bn by mid-July 2023. The provincial government has stated that Rs 7bn from the capital budget and Rs 4bn from the recurrent budget remained unutilized in the previous fiscal year, which concluded in mid-July.

According to Basudev Joshi, chief of Sudurpashchim Treasury Controller Office, only Rs 15bn out of the allocated Rs 22.84bn for the capital budget was expended. Similarly, Rs 8bn out of the allocated Rs 12.3bn for recurrent expenditure was utilized during the review year.

“Despite having numerous development plans, the province government lacked sufficient personnel to execute them,” Joshi explained. “This hindered the spending process.”

Joshi further mentioned that the majority of the unspent budget consisted of equalization grants and conditional grants received from the federal government.

The provincial government has been allocating budgets for projects even smaller than those prepared by local units. Under the Ministry of Physical Planning alone, there were 6,200 projects with budgets ranging from Rs 300,000 to Rs 50m.

“The budgets are allocated with the intention of favoring party cadres and individuals close to influential figures. There is a practice of implementing projects through consumer committees led by party cadres to pocket commissions,” said Rajendra Singh Rawal, the parliamentary party leader of CPN-UML in the provincial assembly. “Under such circumstances, how can the budget be fully spent this year?”

In terms of capital expenditure, the Ministry of Industry, Tourism, Forest, and Environment achieved the highest spending progress at 79 percent, while the Office of the Chief Minister and Council of Ministers attained the lowest progress at 49 percent.

Similarly, the spending progress of the Ministry of Physical Infrastructure stood at 73 percent, the Ministry of Social Development at 71 percent, the Ministry of Economic Affairs and Planning at 65 percent, the Ministry of Land Management, Agriculture and Cooperatives at 65 percent, and the Ministry of Internal Affairs and Law at 56 percent.

This is the second term of the Sudurpaschim Province Government. The average budget spending has remained at 60-65 percent over the past five years. In previous years, the budget spending stood at 59 percent in 2018/19, 62 percent in 2019/20, 64 percent in 2020/21, and 66 percent in 2021/22.

“In the previous fiscal year, budgets were allocated for fragmented projects, and we also faced a shortage of technical staff,” Naresh Bahadur Shahi, Minister of Economic Affairs of Sudurpaschim Province, stated. “Now, we have discontinued fragmented programs. These programs will be implemented by local units. We expect an improvement in spending in the current fiscal year.”

Approximately one-fourth of the budget for 2022/23, amounting to Rs 9bn, was spent in the last month of the fiscal year alone i.e. from mid-June to mid-July.

One hundred and fifty four local bodies have not yet submitted the particulars of endorsement of their annual budget even after the start of the new fiscal year.

According to the 'Budget Update of Local Levels for Fiscal Year 2080/81' prepared by the Ministry of Federal Affairs and General Administration, 20.45 per cent of the local levels are found 'without budget' as of 2.30 pm today. The number of local levels that have passed their annual budgets until that time is 599.

The Ministry said the highest number of local levels not endorsing their budget until the start of the new fiscal year is in Madhesh Province. Sixty-three local bodies in this province have not brought their budget. The lowest number of such local bodies is in Karnali province. Only four local bodies in Karnali province have not brought their budget.

Twenty-nine local bodies in Koshi province, 24 in Bagmati province, seven in Gandaki province, 14 in Lumbini province and 13 in Sudurpaschim province have not provided information on the passage of their annual budget.

Assistant spokesperson at the Ministry of Federal Affairs and General Administration, Ashwin Kumar Pokharel said a high number of local bodies are seen not bringing their annual budget as even the municipalities that have passed their budget have not entered information about that in the Ministry's centralized system.

"Although many local bodies have passed the budget, they have not entered that in the portal. We estimate not more than 20 local bodies have not presented their budget so far," he said. The Ministry's assistant spokesperson said a circular has been sent to all the local bodies that have not entered the information about their budget in the Ministry's portal.

The Ministry, on Sunday, sent letters to all local bodies and the District Coordination Committee, urging them to update information on the presentation of the annual budget for fiscal year 2080/81 BS and the passage of the same by their respective Town or Rural Municipal Assembly.

Both Houses of Federal Parliament have passed the budget presented by the government for the upcoming fiscal year 2080/81 BS (2023/24).

Today's meeting of the National Assembly passed the Appropriation Bill, 2080, received from the House of Representatives with a majority.

In the meeting, Finance Minister Dr Prakash Sharan Mahat presented a proposal for the passage of the Appropriation Bill, 2080.

Before this, a proposal for cutting the expenses of different headings under the Appropriation Bill, 2080, was rejected by a majority of the members.

The respective ministers had responded to queries raised in the course of deliberation on different topics under the Appropriation Bill, 2080 in the meeting.

The House of Representatives passed the budget for the coming fiscal year on June 28. The government had presented the budget for fiscal year 2080/81 in both Houses of the Federal Parliament on May 29.

With the passage of the budget from both Houses, the way for the implementation of the budget has opened from July 17.