Govt. spends only 45% of allocated budget

KATHMANDU, MARCH 14: In the first eight months of the current fiscal 2024/25 (mid-July to mid-March), the government has spent only 45% of the total allocated budget. During the review period, the government's financial deficit exceeded Rs 100 billion due to expenditures surpassing revenues.

As of Mar. 13, the government's total revenue stood at Rs 738.82 billion, while total expenditure reached Rs 839.35 billion. Based on these figures, the financial deficit widened to Rs 15.35 billion.

Budget execution below expectations

According to the daily budgetary comparative analysis by the Office of the Comptroller General, the government has not achieved the expected progress in implementing the annual budget. During the review period, revenue collection reached 50.02% of the annual target, while total expenditure stood at 45%.

For the current fiscal year, the government initially allocated Rs 1.8603 trillion. By mid-January, only Rs 667.60 billion had been spent, which is 45.12% of the annual target. In the first eight months of the current fiscal, current expenditure reached 51.21% of the target, capital expenditure was at 23.37%, and financial management expenditure stood at 47.07%.

Budget size reduced by 9.01% in mid-year review

Through the semi-annual budget review, Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel reduced the total budget size for FY 2024/25 by 9.01% compared to the initial allocation. The government now estimates that only 90.99% of the allocated budget will be spent. The revised estimate projects an expenditure of Rs 1.6927 trillion. However, current spending trends suggest that even this revised estimate may not be met.

Structural issues in government spending

It has been nearly a decade since a constitutional provision mandated that the annual budget must be introduced at least one and a half months before the start of the fiscal year to improve government spending efficiency. Various laws and regulations have also been enacted to ensure timely spending. However, due to poor implementation, budget expenditure remains unsatisfactory. Additionally, weak revenue collection highlights the government’s inability to effectively implement its budget.

For 2024/25, Rs 1.1407 trillion was allocated for recurrent expenditure, of which Rs 584.12 billion had been spent by mid-March. Similarly, Rs 352.35 billion was allocated for capital expenditure, but only Rs 58.41 billion has been spent. For financial management, Rs 367.28 billion was allocated, of which Rs 172.89 billion has been spent.

Revenue collection falls short of target

In the first eight months of the current fiscal, tax revenue collection reached 49.74% of the annual target, totaling Rs 638.79 billion. Meanwhile, non-tax revenue collection reached 60.36% of the target, amounting to Rs 81.54 billion. The government had set an annual revenue target of Rs 1.2842 trillion from taxes and Rs 135.09 billion from non-tax sources.

As per the Comptroller General’s data, the government has received Rs 9.16 billion in foreign grants by mid-March. The target for foreign grants in this fiscal year is Rs 52.32 billion. Additionally, the government has received Rs 9.31 billion from other sources.

Rising fiscal deficit amid low capital expenditure

Economists have expressed concern over the continuous increase in the fiscal deficit despite persistently low capital expenditure. The trend of rushing to complete projects at the end of the fiscal year to inflate progress is expected to continue this year as well. The effectiveness of such last-minute expenditures has always been questioned. Meanwhile, revenue collection has failed to meet targets, further exacerbating the fiscal deficit.

Budget revision still unlikely to achieve targets

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel reduced the budget size for the current fiscal by 9.01% in the semi-annual review. The government now estimates that only 90.99% of the allocated budget will be spent.

Former Finance Minister Barshaman Pun had initially introduced a budget of Rs 1.8603 trillion. The government now estimates that only Rs 1.0293 trillion will be spent on recurrent expenditure out of the allocated Rs 1.1407 trillion (90.24% of the revised estimate). Similarly, capital expenditure is expected to reach Rs 299.50 billion, which is 85% of the allocated amount.

The Finance Minister has stated in the semi-annual review report that the implementation of economic reform programs has yielded mixed progress in accelerating economic activities under the current fiscal year's budget.