Nepal’s economy is not in a good shape. Internal and external factors are behind the slow pace of economic activities. Three years ago, the COVID-19 pandemic disrupted the entire economic system nationally and globally. Tourism, trade, business and industrial sector, hit hard by the pandemic, is still struggling to come to terms with the crisis. Post-pandemic economic recovery is not optimistic either. Widening trade deficit, imbalance in the Balance of Payment, depleting foreign currency reserves, declining amount of remittance and capital flight are some visible causes of our economic downturns. Russia-Ukraine war has further exacerbated the economic woes as it increased energy prices and choked Nepal’s import-based export trade. Of late, high interest rates have affected the business sector. Banking and Financial Institutions (BFIs) are unable to disburse loans to the business persons in the absence of the adequate deposits.
Revenue mobilisation and capital expenditure are not up to the mark, which has posed real challenges to the economy at the moment. The other day Deputy Prime Minister and Finance Minister Bishnu Prasad Poudel informed that only about 15 per cent of the total capital budget of the current fiscal year 2079/080 has been spent so far, which is indeed a worrying scenario. According to the Financial Comptroller General's Office, capital expenditure is just 15.81 per cent (60.1 billion) of the total allocation of Rs. 380.3 billion. The government has collected Rs. 511.85 billion in revenue by Saturday evening while expenditure stands at Rs. 620 billion. Owing to the poor mobilisation of revenue and development budget, the Finance Ministry faces pressure on the ways and methods of formulating the budget of the next fiscal year 2023/24.
In view of the poor revenue collection and capital spending, the Finance Ministry has rolled out a series of austerity measures so as to slash the recurrent expenses. The ministry expects to maintain public finance in the balance with the new fiscal steps that will see an increase in spending in the national pride and game changer projects, thereby generating employment and boost national income. According to the news report of this daily, the ministry has decided to cut off 20 per cent budget spending incurred under different headings of the approved budget of all ministries/agencies of federal government, including fuel, maintenance, stationery and office assistance, newspapers, printing and publication of information, service and consultancy. The budget allocated for information system and software operation, travel and other allowances, programme cost, monitoring and evaluation cost, staff training, workshop and seminar, sundry expenses, machinery and equipment, furniture and fixtures and structural improvement of the buildings will also be reduced.
The government seeks to save a total of Rs. 10.5 billion from the austerity measures while the projects with an approved budget amounting to Rs. 14 billion would be withheld. In order to give momentum to the national projects, the government will proceed with their procurement process with the approval of the Finance Ministry. The ministry will not undertake any organisation and management survey in a way that new vacancies are created. It will not announce new vacancies and depute employees exceeding the vacancy quota without prior approval of the ministry. It will also take strict policy to minimise the foreign junkets. The ministry has decided to stop execution of budgetary projects and programmes which are yet to start and not to create extra burden of payment in the current fiscal year. These austerity steps are appropriate but the ministry needs to effectively implement them to achieve the stated objectives.