Friday, September 26, 2025

Govt announces sweeping austerity measures

Kathmandu, Sept. 24

The government has announced a series of budget control measures aimed at improving fiscal responsibility and ensuring the efficient mobilisation of public funds.

The directives issued by the Ministry of Finance (MoF) on Tuesday, as per the Cabinet decision on Sunday, focus on curbing unnecessary spending and prioritising strategic projects.

According to the new guidelines, budgetary support will be assured to the projects that have already received source approval. However, no new, small-scale, or redundant projects will receive funding unless they align with the national priority objectives.

As per Section 21 of the Economic Procedures and Financial Accountability Act 2018, all new or unprepared projects within the capital expenditure framework will be locked to prevent unnecessary duplication or misallocation of funds. Similarly, any budget that remains unused due to a lack of identified projects, particularly under general categories such as ‘miscellaneous’ or ‘other’, will also be locked.

The government has also taken steps to ensure that small, fragmented projects that could be better handled by provincial and local governments will not be funded from federal resources. Likewise, any liabilities incurred in the previous fiscal year but left unpaid will be given priority, with budget locks lifted to settle outstanding payments, if needed.

In a move to safeguard national priority projects, the MoF has stated that funds can be transferred from locked budget sub-headings to support projects with approved sources of funding, particularly those that have created or are expected to create liabilities within the current fiscal year.

This flexibility also covers the national priority projects, even if their allocation is currently insufficient.

Likewise, when rebuilding government structures, a new emphasis will be placed on creating service-user-friendly, open, and well-planned spaces that accommodate the nature of work and staff requirements.

 

Consumer committees scrapped

In a significant move, the MoF has prohibited consumer committees from implementing projects exceeding Rs. 1 million.

Similarly, various austerity measures were introduced to control unnecessary expenditure and improve fiscal discipline across all levels of government. They include allowances, consultancy services, and organisational structures.

One of the most significant changes involves a crackdown on allowances. From now on, regular meeting allowances will not be provided to officials and employees of public bodies for their routine duties. However, allowances can still be given for meetings held outside of office hours for legally established committees.

Furthermore, officials who reside in private residences, either owned by themselves or their families, will no longer be eligible to receive accommodation allowances.

 

Control on consulting services

The government has also imposed stricter controls on the use of consulting services. Funds allocated for work that can be performed by existing staff will not be used to hire external consultants. Similarly, consulting services can be procured for capital research and consulting services, not for drafting bills, rules, regulations, guidelines, and similar tasks.

The new measures mandate that all government offices should manage service expenses – particularly for water, electricity, and communication fees – more economically. Employees are instructed to ensure that electricity-consuming devices such as lights, air conditioners, and fans are turned off when not in use.

 

Install offices in modest areas

Government offices are restricted to renting houses with more facilities than necessary and refrain from renting in commercial areas or along main roads. This policy applies to both domestic offices and diplomatic missions abroad, where lease renewals should prioritise modest housing options.

The government has also prioritised the use of old government vehicles, furniture, and electronic equipment. Federal, provincial, and local governments are required to use existing resources, such as old vehicles, mobile phones, computers, and motorcycles.

Similarly, government offices affected by the Gen Z movement are to receive necessary office equipment and furniture through transfers from nearby offices. The government has also initiated plans to insuring physical government structures to ensure their long-term sustainability.

 

No new hiring

In an effort to streamline government operations, the government said that no new positions will be created, except in essential technical roles. To avoid long-term liabilities, expert services and consultancies should replace the creation of permanent positions. Ministries such as Finance, Home Affairs, and Foreign Affairs, which have recently undergone organisational surveys, will also undergo brief reviews to eliminate unnecessary structures and positions.

Likewise, the government also plans to abolish redundant commissions, such as the Land Problem Settlement Commission, and make structural changes to enhance national security and improve revenue collection.

The restructuring includes integrating certain departments, such as the National Investigation Department and the Revenue Investigation Department, under the Ministry of Home Affairs and the MoF, respectively.

Further austerity measures have been implemented to reduce current expenditure with a provision to restrict the non-essential training, workshops, and seminars, and conduct trainings online or at the government facilities. International travel will be limited to essential government representatives, with delegations to international conferences set at 10 members for heads of state and three members for other delegations.

The government has also said that public sector investments will now be restricted to profitable or foreign-aid-funded projects. No new investments will be made in financially weak public corporations, and government-invested corporations will be prohibited from issuing rights shares or further public offerings during this period.

As per the new guidelines, no new vehicles will be purchased for official use unless existing vehicles are insufficient for critical tasks, such as conducting elections or ensuring security. 

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Provinces must follow austerity rules: FM Khanal

 Biratnagar, Sept. 24

Finance Minister Rameshore Prasad Khanal has said that the austerity directives issued by the Ministry of Finance (MoF) on Tuesday must also be implemented by provincial and local governments.

Amidst growing dissatisfaction among provincial ministers who have raised concerns that, as autonomous and independent bodies, provincial governments are not obligated to implement decisions made by the federal Cabinet without passing their own laws, Minister Khanal stressed that the decisions of the Cabinet must be followed by all.

While visiting the Internal Revenue Office in Biratnagar, which was destroyed in a fire, Minister Khanal briefly responded to questions from the media, reiterating the need for everyone to cooperate in adhering to austerity measures.

The federal government’s decisions have raised uncertainty about the facilities for those appointed by provincial assemblies through provincial laws.

In response to the federal government's decision, Rewati Raman Bhandari, Minister for Internal Affairs and Law of Koshi province, said that from a constitutional and legal standpoint, provincial governments are not bound to follow the federal government’s decision. He argued that the provinces have the autonomy to make their own decisions, and if changes are needed in provincial laws, they must be amended accordingly.

However, FM Khanal clarified that this decision was made for austerity purposes and must be implemented across all levels of government, irrespective of provincial laws. "This decision has been taken for austerity, and being a federal Cabinet decision, it applies to all bodies. No expenditure should be made from the federal government’s grants on these matters," he said.

Minister Khanal further elaborated that even if appointments are made according to provincial laws, any expenses for these positions, which are funded by federal grants, should not be used for unnecessary appointments.

Minister Khanal indicated that while the federal government’s decision does not nullify provincial laws, it could impose restrictions on how federal grants are used.

 Published in The Rising Nepal daily on 25 September 2025.   

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