Finance Minister Bishnu Prasad Paudel has reaffirmed the government’s commitment to the effective implementation of the FY 2025/26 budget, addressing widespread skepticism from stakeholders, including the private sector, about the state’s ability to carry out its financial plans.
Realistic Revenue Projections and Debt Consideration
Speaking at an event in Kathmandu on Saturday, Paudel emphasized that the upcoming budget was crafted with a clear strategy for revenue mobilization. “The revenue projections have been made more realistic,” he said, highlighting that the government has carefully considered the country’s capacity to repay public debt while identifying revenue sources.
For the next fiscal year, the government targets Rs 1.315 trillion in tax revenue from 700 tax headings. Including sub-national revenues, the overall tax target stands at Rs 1.480 trillion.
Focus on Austerity and Resource Efficiency
To control rising expenditure, the budget includes policy corrections focused on resource efficiency and fiscal discipline. Key measures include:
- Capping expenses for central-level projects at Rs 30 million
- Promoting alternative development finance
- Strengthening project management
- Reforming public procurement processes
Paudel noted that the budget attempts to strike a balance between recurrent spending and capital investment, in light of limited fiscal space.
Declining Foreign Assistance Raises Alarm
In recent years, domestic borrowing has become a primary financing tool due to weak revenue growth and declining foreign aid. In the current fiscal year, Nepal had aimed to receive Rs 52.32 billion in grants but has secured only Rs 16.61 billion—just 31.74% of the target—in the first 11 months. Experts warn that this trend could worsen as major donors like the USA and EU revise their aid policies.
Similarly, foreign loan mobilization has fallen short. Of the targeted Rs 217 billion, the government has secured only Rs 89.68 billion, according to the Public Debt Management Office.
Strengthening Project Oversight and Spending Controls
The FY 2025/26 budget includes new oversight mechanisms for large-scale projects. Projects with costs exceeding Rs 250 million will be tracked through a national dashboard. Other proposed reforms include:
- Capping federal grants to local governments at 50% of project costs
- Controlling contingency and consultancy expenses
- Enhancing public service delivery
Recognizing a potential revenue shortfall, the government is also prioritizing private sector investment to fill funding gaps.
Calls for Reform in Budget Oversight
Despite these pledges, experts remain cautious. Ramesh Paudel, former member of the National Planning Commission (NPC), criticized current oversight mechanisms for recurrent spending. “Unless the existing system is improved, effective budget implementation will remain elusive,” he said, urging the NPC, Ministry of Finance, and line ministries to take stronger roles in minimizing unproductive expenditure.
