National Resources Estimation Committee suggest possibility of deficit budget next FY

By Hemant Joshi, Kathmandu, March 4: The National Resources Estimation Committee has set the resource ceiling for the fiscal year 2082-83 BS (2025-26), suggesting a potential budget deficit of Rs 660 billion.

For the upcoming fiscal year, a budget ceiling of Rs 195.5 billion has been established, with an estimated Rs 126.3 billion expected to be raised through internal revenue collections.     

If the budget is set according to the determined ceiling, the available sources, totaling Rs 637.55 billion, will be insufficient.     

This gap will be covered through internal and external loans and grants. The increasing public debt in compared to the country’s Gross Domestic Product (GDP), along with the significant expenditures required for repaying both the principal and interest, poses substantial challenges for budget management. Moreover, relying on loans for financing current expenditures rather than capital investments is another critical challenge.     

Loans are often cited as the primary source for funding large-scale budgets, while limitations on revenue collection continue to be a recurring issue. The revenue collection target for the upcoming fiscal year is close to that of the current fiscal year. However, the Committee has projected a 10.3 percent increase in internal revenue collections for the upcoming fiscal compared to the revised estimate for the current fiscal year. For the current fiscal year, the government had initially set a revenue target of Rs 1260 billion, which was later revised to Rs 1145 billion during the midterm review.     

According to Vice Chair of the National Planning Commission, Prof. Dr. Shivaraj Adhikari, the 10.3 percent increase in the revenue target for the upcoming fiscal year is realistic. He stated, "We have estimated the internal revenue collections for the upcoming fiscal year based on the midterm revenue review of the current fiscal year. In the past, revenue growth target would typically be around 20-22 percent, but this time, it is just 10 percent. This target is realistic," he told RSS.     

It seems that about Rs 650 billion of resources will be insufficient when the budget ceiling for the next fiscal year is set so that around Rs 1.9 trillion budget can be brought. The shortfall amount has to be met by raising foreign loans and grants and internal debt.     

As per the estimates of the Resources Estimation Committee, foreign aid will increase by 28.8 per cent in the coming fiscal year as compared to the current fiscal year.     

The Committee has estimated that Rs 45 billion in foreign grant and Rs 235.9 billion in foreign loan will be received in the next fiscal year. The government had, through the mid-term review of the budget for the current fiscal year, also revised the expected target of foreign loans and grants.     

The government's target to take foreign loan of Rs 217.67 billion for the current fiscal year has been reduced to Rs 180.84 billion through mid-term review in January last year.     

Similarly, the government's target of receiving foreign grants of Rs 52.33 billion in the current fiscal year has been reduced to Rs 36.63 billion through the budget review.     

Commission's Vice-Chairman Adhikari said that although the commitment received from donor agencies to provide foreign loans has been taken into account while estimating the resources for the next fiscal year, there may be some gap in the receipt of foreign grants.     

He said especially whether or not the money received through the Millennium Challenge Corporation, which is US grant assistance, will also make a difference in the volume of foreign grants for the next fiscal year.     

The size of the internal debt has also been sought to increase compared to the current fiscal year while showing the source of meeting the deficit budget for the next fiscal year.     

The government has set a target of taking Rs 330 billion internal loan for the current fiscal year. For the next fiscal year 2082/83 BS, it is estimated that Rs 357.46 billion can be met by raising internal debt.(RSS)