Development allocations up, reforms get priority
Economic growth target
is 6%, inflation to be contained at 5.5%
Kathmandu, May 30:
Deputy Prime Minister and Minister for
Finance Bishnu Prasad Paudel on Thursday unveiled the budget of Rs. 1,964.11
billion for the upcoming Fiscal Year 2025/26.
Of the total allocation, Rs. 1,180.98
billion (60.1 per cent) is allocated for recurrent expenditure, Rs. 407.89
billion (20.8 per cent) for capital expenditure, and Rs. 375.24 billion (19.1
per cent) for financing arrangements.
This estimated expenditure is 5.6 per cent
higher than the allocation for the current fiscal year and 18.2 per cent higher
than the revised estimate, addressing the joint session of the Federal
Parliament, DPM Paudel said.
The size of the budget of the current FY
2024/25 is Rs. 1,860.40 billion. Likewise, sectoral allocations include Rs.
1140.66 billion (61.31 per cent) for recurrent expenditure, Rs. 352.35 billion
(18.94 per cent) for capital expenditure, and Rs. 367.28 billion (19.74 per
cent) for financing.
Out of the total allocation for the next
fiscal, Rs. 417.83 billion has been earmarked for fiscal transfers to
provincial and local levels.
Among the sources to cover the estimated
expenditure for the upcoming fiscal year, Rs. 1,315 billion will be raised
through revenue, and Rs. 53.45 billion through foreign grants, leaving a
deficit of Rs. 595.66 billion.
“To cover this deficit, Rs. 233.66 billion
will be raised through foreign loans. Remaining Rs. 362 billion will be managed
through domestic borrowing," said DPM Paudel.
The shortage of resources has persisted
over the years, which is evident in the identical scenario in the budget of
2024/25 as well. This year, there is a budget deficit of Rs. 547.67 billion,
and the government plans to raise Rs. 217.67 billion from foreign loans and Rs.
330 billion from domestic borrowings.
GDP growth estimated at 6%
Through the new budget, the government aims
to achieve an economic growth rate of 6 per cent while the inflation will be
limited at 5.5 per cent. For this year, the government had a target of 6.5 per
cent GDP growth, but according to the estimates of the National Statistics
Office, the country will achieve 4.61 per cent growth.
"I expect that the implementation of
this budget will accelerate economic reform and create a favourable environment
for achieving high and sustainable economic growth. I believe this budget will
play a vital role in increasing private investment, expanding economic
activities, fostering entrepreneurship, and diversifying the economy to create
employment opportunities,” DPM Paudel said.
He also expressed his hopes that the budget
will succeed in strengthening revenue mobilisation, maintaining budgetary
discipline, and focusing government investment on high-return sectors.
According to DPM Paudel, this will bring greater momentum to the economy and
accelerate the pace of development.
He accorded priority to education, home
affairs, physical infrastructure and health.
The government has removed 4,654
development projects that found their entry to the budget of this year to
streamline project management.
A new standard has been enforced whereby no
new infrastructure project implemented by the federal government will receive
an allocation of less than Rs. 30 million. This is expected to aid in resource
management for national pride and nationally prioritised projects and enhance
implementation efficiency. Line ministries will be made more accountable to
improve budget execution capacity and increase capital expenditure.
Likewise, the projects that have completed
preparatory steps such as land acquisition and forest clearance will be moved
to the procurement phase. To accelerate project execution, contract agreements
will include provisions for three-shift work arrangements.
Facilitation to development
The Finance Minister said that to ensure
timely, cost-effective, and quality completion of infrastructure projects, the
Public Procurement Act will be amended, and the electronic procurement system
will be upgraded.
To further ensure the smooth operation and
management of development projects, standard bidding documents will be
developed, revised, and localised, while project chiefs and contractors will be
made more accountable for results.
Procurement preparation for the programmes
and projects included in the budget can begin immediately, and contracts can be
signed within the current fiscal year once the budget is approved, said DPM
Paudel.
Similarly, he has stopped the trend of
transferring budget from the national pride and high-priority projects, except
in special circumstances. Projects costing above Rs. 250 million will be
monitored via the National Dashboard System.
The government is also set to mobilise
development assistance for large infrastructure projects like Dudhkoshi and
Upper Arun through co-cofinancing from multiple donor agencies based on
financial feasibility.
The projects operated with foreign aid will
be recognised as national priority projects and will receive clearance to use
forest areas accordingly. This move is expected to speed up project
implementation.
It has announced several methods to ensure
the development projects are completed in time and within the stipulated budget
size. If project costs increase due to delayed decisions, responsible officials
will be held accountable. Projects with over 80 per cent work progress will not
face funding shortages.
Those responsible for preparing flawed
designs and specifications leading to abnormal liabilities will be held
accountable and brought within the legal framework, said DPM Paudel.
“As per the Constitution, legislation will
be enacted to strengthen budget discipline across federal, provincial, and
local governments. Standards for public expenditure will be drafted and applied
at all three levels,” he announced.
Austerity measures announced
To ensure grants provided from the public
treasury reach target groups and to eliminate duplication, a national grant
policy based on production incentives will be formulated and implemented at all
levels of government. The maximum limit for grants to be mobilised by the
government will be set at 50 per cent of the total project cost.
The Finance Minister also said that the
salaries and benefits of office bearers and employees of institutions, boards,
committees, and public bodies receiving state-funded facilities will be
reviewed and harmonised. A recommendation committee will be formed to submit a
report with suggestions within three months.
To cut down the expenditures, the age
threshold for receiving senior citizen allowance has been increased to 70
years. No foreign visits at the government expenses would be permitted except
in cases of high-level diplomatic visits or mandatory representation in
international organisations where Nepal is a member.
Likewise, without a decision of the
responsible authority that a task cannot be completed within existing
structures, no consultancy services will be allowed. Except for large and
complex projects, supervisory consultants will not be hired.
“No consultancy services will be permitted
for drafting Acts, regulations, policies, procedures, or standards,” read the
budget document.
The contingency limit in construction works
will also be reduced - for projects with cost estimates up to Rs. 1 billion,
the contingency will be capped at 3 per cent and for those above Rs. 1 billion,
at 2 per cent.
Citing resource constraints, DPM Paudel did
not announce an increase in the salary of the civil servants, instead hiked the
allowance to Rs. 5,000 from Rs. 2,000.
He also said that the housing programme for
civil servants, teachers and security personnel will be implemented in all
seven provinces, and houses will be provided to them on a loan at subsidised
interest rates.
Fertiliser plant to get traction
The government has allocated Rs. 28.82
billion for subsidies on chemical fertilisers for the upcoming fiscal year.
Paudel said that the supply of chemical fertilisers will be increased to
600,000 tonnes from the said allocation of budget.
Necessary preparations will be made to
establish a chemical fertiliser factory through the Investment Board Nepal.
The government has proposed to promote
production on arable land around the Pushpalal Mid-Hill Highway and Madan
Bhandari Highway.
The budget said that arrangements will be
made to mandatorily test quality and pesticides on food grains, vegetables,
fruits, meat and dairy products before selling them in the market.
Records of government and public land will
be updated and protected. The government has said that land banks will be
established in at least 100 local levels in the upcoming fiscal year.
The budget proposes to give high priority
to legal, policy and procedural reforms necessary to promote private investment
and create employment by improving the business environment.
The industries that have been granted
permission to establish new industries in special economic zones and industrial
areas will be given a rent exemption for the first three years. The monthly
rent of the special economic zone will be reduced from Rs. 20 to Rs. 5 per
square meter.
It has been proposed in the budget to
encourage industries operating in the Kathmandu Valley to relocate to
industrial areas outside the valley.
The budget has proposed that Nepal will be
developed into an excellent destination for foreign direct investment.
DTAAs for FDI promotion
Investment promotion and double taxation
avoidance agreements (DTAAs) will be made with countries with investment
potential.
An automated single point service centre
will be established under the Investment Board Nepal and viability gap funding
will be arranged to attract investment in projects in priority areas. Project
development agreements worth Rs. 700 billion will be signed with the private
sector and construction work of projects worth Rs. 400 billion will be started
within the fiscal year 2025/26.
The budget proposed that quality standards
will be determined in accordance with international standards and mutual
recognition will be established with export destination countries.
Easy supply of food and salt will be
ensured in remote and hilly areas. Storage capacity will be expanded for easy
supply of fuel, said the DPM Paudel. The government has taken forward the
construction of the Siliguri-Chaarali cross-border petroleum pipeline and
storage facility.
Nepal will be branded as a safe and
attractive tourist destination through infrastructure development, expansion of
quality services and marketing.
The government has adopted a policy of
providing income tax and electricity tariff exemptions to hotels and resorts
like manufacturing industries.
Around Rs. 4.15 billion has been allocated
to develop the Tribhuvan International Airport into a boutique airport by
expanding its capacity to manage the increasing passenger traffic. Similarly,
the Pokhara International Airport will be developed into a tourist hub.
Easy access of citizens to public
information will be maintained. Transparency and accountability will be
enhanced by promoting press freedom.
Partnerships will be formed with the
private sector in the construction, operation and infrastructure development of
data centers.
"An information technology park will
be established in Kathmandu. A feasibility study will be conducted to establish
a data center in the mid-hills to attract foreign investment in the information
technology sector. Land, uninterrupted power supply and security will be
provided to domestic and foreign companies wishing to establish a data
center," read the budget.
The use of social media and digital
platforms will be made dignified and systematic, said the budget.
"To sustainably solve the unemployment
problem, the skills and competencies of young manpower will be developed in
accordance with the demand of the labor market. I have allocated Rs. 1.99
billion for the operation of the National Employment Promotion Programme,"
said DPM Paudel.
Employment portal to be launched
An employment portal will be launched to
update the details of skilled people looking for employment and connect them to
the labour market.
Likewise, bilateral labour agreements will
be signed with additional countries through labour diplomacy.
Additional agreements will be signed with
destination countries to ensure safety and service facilities at the workplace
of women going for foreign employment.
To produce the necessary manpower based on
the demand of domestic industries, "On the Job" and
"Apprenticeship" programmes will be launched by revising the
curriculum.
All Nepalis will be included in the
life-cycle-based social security system. People who earn regular income will be
included in contribution-based social security programmes.
The budget has focused on the construction
of large reservoir projects. Private sector investment will be encouraged in
hydropower surveying, production, transmission and distribution, said the
budget.
"Micro and small hydropower, solar and
wind energy will be developed for energy mix," said the budget.
Carbon emissions will be reduced by
increasing the production and consumption of alternative energy, he DPM Paudel.
Published in The Rising Nepal daily on 30 May 2025 (jointly prepared with Laxman Kafle).
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