The Ministry of Finance (MoF) has initiated preparations for the fiscal year (FY) 2026/27 budget, with a strong focus on containing recurrent expenditure.
Senior officials said the MoF on Sunday began consultations with line ministries, constitutional bodies and other key stakeholders to determine resource allocation and spending priorities for the upcoming fiscal year. The first phase of discussions has targeted ministries and agencies that account for a large share of recurrent spending.
“In the initial phase, we have started consultations with ministries and constitutional bodies that receive a significant portion of recurrent expenditure,” a senior MoF official said.
The government aims to rein in administrative expenses while improving the efficiency and productivity of public institutions. Accordingly, the discussions have centred on regular programmes, mandatory financial obligations and the minimum budget required to keep government agencies operational in FY 2026/27.
Recurrent expenditure—primarily driven by civil servants’ salaries, allowances, office operations and social security payments—has continued to rise in recent years. With revenue growth remaining weak, the expanding recurrent burden has limited the government’s ability to allocate adequate resources for capital investment and development spending.
According to MoF officials, the consultations are intended to assess the realistic funding needs of ministries and government bodies, while discouraging budget proposals that increase recurrent costs without corresponding improvements in service delivery or economic output.
Based on these consultations and the government’s stated priorities, the National Planning Commission (NPC) will determine the budget ceiling for the next fiscal year. The ceiling is set by the National Resource Estimates Committee (NREC) under the NPC to ensure alignment between the annual budget and periodic development plans, while safeguarding fiscal discipline and macroeconomic stability.
As mandated by the Constitution, the government must present the detailed budget for FY 2026/27 on Jestha 15 (May 29). By law, the NREC is required to fix the budget ceiling by mid-February, and the government is expected to frame its budget within this limit.
However, this provision has not always been strictly observed. In the current fiscal year, the NPC set an expenditure ceiling of Rs 1.9 trillion based on initial resource estimates, but the government unveiled a budget of Rs 1.964 trillion, exceeding the prescribed limit.
Economists have repeatedly warned that unchecked growth in recurrent expenditure could undermine fiscal sustainability and crowd out investment in infrastructure, health, education and other development priorities. The government’s emphasis on restraining recurrent spending in the upcoming budget is seen as an effort to address these concerns, though its effectiveness will depend on implementation.
