29 January, Kathmandu. Deputy Prime Minister and Finance Minister Bishnu Paudel has said that the current budget of Rs 17 trillion 93 billion 83 crore brought by the then Finance Minister Janardhan Sharma on June 15 cannot be spent in full. Presenting the revised estimate of the budget in the House of Representatives on Sunday, he informed that the income and expenditure could be up to Rs 15 trillion 49 billion 99 crore.
After the completion of 7 months of the fiscal year, Finance Minister Podel showed that the government’s ability to raise its hand has been reduced to 2 trillion 44 billion rupees, or about 14 percent of the budget, to find and spend resources. However, the government has been accused of budgeting without looking at its ability to reliably collect and spend taxes. This revised estimate has also revealed the fact that the budget is being rigged for political gains.
Former Finance Secretary Rameshwar Khanal says that it is normal to have 5-6 percent revision in the budget in the half-yearly review, but Finance Minister Paudel’s revised estimate of 14 percent on Sunday confirms the mess in government resources and government expenditure. . System.
He said, ‘It is not normal to make a revised estimate by reducing 14 percent.’
The practice of presenting the Revised Budget Estimates is universal. It is considered as an opportunity for governments to evaluate their status and performance. In Nepal too, after 2024, a revised estimate of budget expenditure is being presented.
Khanal says that after 2056, a mid-term review was started internally and then it was made public. ‘This is not a legal amendment, it does not even amend the then Appropriation Act’, he says, ‘even if it does not have a legal basis, it indicates the efficiency of the government and the state of the economy.’
Where did the amendment happen?
Finance Minister Paudel, who revised the estimate of Rs 2 trillion 44 billion less in the total budget, said that there will be a reduction of Rs 1 trillion 61 billion 31 crore in the current expenditure. He has set a target of limiting the current expenditure of 11 trillion 83 billion 23 billion to 10 trillion 21 billion 92 billion.
The government has also reduced the target of development expenditure by Rs 66.53 billion. The capital expenditure of Rs 3 trillion 80 billion 38 billion has been reduced to Rs 3 trillion 13 billion 85 billion. Even at the end of January, when 18 per cent of the total allocation budget has not been spent, he has set a target of reaching 82.51 per cent of the capital expenditure in the next 5 months.
In relation to the financial system, the budget of 2 trillion 30 billion 21 billion has been revised to 2 trillion 14 billion 21 billion. 16 billion has been cut in the budget on this subject.
On the basis that the government has spent 576 billion 340 crore in the current budget, 53 billion 45 billion in capital and 67 billion 76 billion in financial system, it does not seem easy to fulfill the future target.
shrinkage at source
When the budget was brought on June 15, the then Finance Minister Sharma had set a target of 14 trillion 3 billion 14 crore revenue collection. However, now the revised estimate is that only Rs 12 trillion 44 billion 75 crore will be collected. In other words, Finance Minister Paudel believes that the revenue will be Rs 1.58 billion 39 crore less than the previous target.
The government has collected 6 trillion 51 billion 62 billion rupees i.e. 24.8 percent less revenue than the target of 4 trillion 90 billion 4 billion rupees. According to Poudel, the growth rate of this year’s revenue collection is 15 per cent lower than the mid-term of the last financial year. Such a bad situation is the worst in 55 years (after 2024-25).
The government has found itself in the unusual position of revising the budget after coming under immense pressure of revenue collection. The budget cuts in the amendment focused primarily on the current side. In the first 6 months the revenue did not increase as per the target and after coming to the conclusion that the current expenditure could not be maintained even if the revenue increased as per the target in the remaining period, it seems that the government is helpless. Cut current expenditure by a large rate.
4 trillion 55 billion 12 crore rupees have been spent by the government on office operations including salary facility to the government employees from last July to mid-November. But during this period the government got only a revenue of Rs 4 trillion 90 billion. Whereas this year the target was to collect 14 trillion 3 billion 75 billion revenue by spending 11 trillion 83 billion 23 billion.
However, an 8-month-long ban on luxury goods after Baisakh 2079 and a 14-month-long requirement to keep cash margin before imports severely hit revenue collections and resulted in a loss of nearly a quarter of the targeted revenue.
Due to the international situation caused by the Ukraine-Russia war, mobilization of loans and grants from international donor agencies has also slowed down. Due to this, the government had to cut the budget of not only the current expenditure but also the development expenditure (capital and financial system).
In addition, due to lack of liquidity in the domestic market, contraction in demand and high interest rates due to a recessionary economy, the government is also unable to raise domestic debt as per the target. So the government has reached a position where it does not make much effort to spend on subjects other than mandatory obligations.
The Finance Ministry has also revised the estimates of grants and loans to be received in the current financial year. It is estimated that foreign subsidies will be 17 billion less than the initial target. Finance Minister Paudel has said that 55.45 billion in foreign grants are expected to be received this year, but only 38.45 billion will be mobilized.
The target for obtaining foreign loan has also been reduced by Rs 71.73 billion. The target of raising 2 trillion 42 billion 26 billion foreign debt has now been reduced to 1 trillion 70 billion 53 billion. The domestic debt recovery target has been revised to Rs 16 billion. The target has been reduced from 2 trillion 56 billion to only 2 trillion 40 billion.
In the six months to the end of January, the government has raised 7.21 billion in foreign grants, 28.57 billion in foreign loans and 30 billion in domestic loans.
The Government does not have a conducive environment to mobilize resources as per the revised target. For this reason, Finance Minister Poudel pointed to the budget target of 8 percent economic growth not being achieved and said that due to the strength of the dollar and the increase in the interest rate, the payment of principal and interest on public debt and the increase in the price of chemical fertilizers has created an additional liability of 67 billion.
To meet such challenge, he has also announced various action plans to reduce expenditure and increase revenue collection through mid-term review. Finance Minister Paudel says that it will take time for the economy to improve, so there is a need to cut government expenditure.
Announcing the decision to cut the budget by 20 percent from the current budget, Finance Minister Poudel has asked the ministries to reduce the current expenses as well.
expansionary policy challenges the balance
Finance Minister Poudel has said that the budget is not sufficient for the mandatory expenditure of the government and it is difficult to bear the expenditure to pay for the subsequent obligations.
Due to current and long-term obligations, resource management has become more difficult, and one of the goals of the Revised Estimates of the Finance Minister’s budget is to maintain a balance in the budget.
Even the Finance Minister himself is not sure that the slowdown in the economy will be resolved immediately. He said that he would try to instill professional confidence in the private sector, control anomalies and deviations in revenue mobilization, solve problems of budget implementation and overall problems in the financial sector.
“However, due to some of our own structural limitations and some international influences, it appears that reform efforts will take time to yield concrete results”, he said.
Economist Dr. Prithviraj Legal said that it is clear from the revised estimate of the budget that the budget itself has not been made on the real ground. While making the budget it is clear that the revenue which is not coming in is kept and foreign aid is inflated, he said, adding that there is a tendency to make the budget only for political gains.
‘Old age allowance which was available in 70 years was reduced to 68, salary of employees increased’, says ‘even in last 6 months revenue did not increase as per target, subsidy did not come’, loan did not come, and capital Expenditure was not going well, so revision was inevitable.’
They claim that the actual expenditure may not be as much as the revised estimate. He remarked that considering the state of the economy, there would be major changes in the revision of the mid-term review till the time the budget is brought on the basis of actual potential.
‘For some years the budget is prepared and reviewed in the mid-term, one brings the budget and the other comes and reduces it. He says that as long as there is a tendency to increase the size of the budget, this situation will continue. Economist Legal further says, ‘This amendment reveals the real potential of the government.’