Budget Gets Downsized

As Nepal's economic indicators have still remained not so encouraging owing to various challenges posed by internal factors as well as global economic slump, the federal government has been making all-out efforts to bring the national economy back on track. With revenue collection target unlikely to meet due to import restrictions in the past and other reasons, the government has adjusted the size of budget of the current fiscal year 2022/23 by slashing the total expenditure by 14 per cent to Rs. 1549.99 billion from Rs. 1793.8 billion. The estimates for the recurrent budget have also been brought down to Rs. 1021.9 billion from Rs. 1183.2 billion. The government has focussed on enhancing business confidence of the private sector, making relations between the public and the private sector credible and helpful, ending anomalies and divergences in revenue mobilisation, and resolving problems seen in the financial sector and the implementation of the budget. 

Besides, the government has come forward with the policy to maintain budget balance, emphasise the need for increasing capital expenditures, reduce expenditures, enhance the efficiency of the revenue administration and increase the tax obedience and check its leakage. It has reduced the initial capital allocation to Rs. 313.8 billion from Rs. 380.3 billion. It has also adjusted budget of financial management to 93.05 per cent of the initial allocation of Rs. 230.2 billion. The government has also altered the estimates of revenue collection. It has downsized the total revenue estimates by 11.29 per cent of the total target of Rs. 1403.1 billion. The government now targets to collect Rs. 1244.7 billion in revenue in the current fiscal year. Meanwhile, the federal government is to mobilise revenue of Rs. 1101 billion and it plans to provide Rs. 143.7 billion to the provinces as well as local bodies. Likewise, it has minimised the target for foreign grants to Rs. 38.4 billion from previous estimates of Rs. 55.4 billion. Foreign loans will be downscaled to Rs. 170.5 billion against the earlier target of Rs. 242.2 billion. 

Presenting a half yearly report of budget for the fiscal year 2022/23 at the House of Representatives on Sunday, Deputy Prime Minister and Finance Minister Bishnu Prasad Poudel said that the ongoing economic contraction may hit the economic growth. Poudel said that the target of achieving an economic growth rate of eight per cent for the current fiscal year would not be possible in view of the current growth of the economy. The previous government had set an ambitious target of attaining eight per cent economic growth despite a spate of problems, including a liquidity crunch. Production-oriented industries within the country have failed to run in their full capacity, leading to a slowdown in the economic growth rate. DPM Poudel, however, said that paddy production may increase this year while the tourism sector was recovering gradually.

Rising inflation is another obstacle to economic growth. The Nepal Rastra Bank (NRB) had aimed at containing the inflation to seven per cent in the current fiscal year. But the year-on-year inflation based on the Consumer Price Index (CPI) has reached 7.26 per cent. However, the nation has witnessed a 24.3 per cent increase in the inflow of remittance in Nepali currency in the first six months of the current fiscal year. During the period, the country received as much as Rs. 585.8 billion in remittance. Other positive signs are that the current account is in surplus of Rs. 97 billion and the total foreign exchange reserve has risen by 10 per cent to Rs. 1337.2 billion compared to Rs. 1215.8 billion. The amount is sufficient to cover imports for 10.4 months.