Budget Implementation

The budget for the fiscal year 2025/26 has been presented with a focus on strategic allocation and fiscal prudence. Pragmatic, reform-oriented and grounded in fiscal discipline, the budget has made amendments to the issues that drew criticisms in the past. Its implementation is expected to expand economic activities, increase private investment and employment, complete projects in time and achieve the economic growth rate of 6 per cent. Policy level, practical and structural reforms are being carried out to make budget implementation effective. 

The government, through the newly announced budget, has extended several tax incentives to promote the information and technology sector, green energy, digital payments, and domestic industries. The budget also promotes startups, the culture of which has proved to be a bedrock of prosperity in affluent countries. The provision of income tax exemption for startup businesses for up to 5 years has been increased to a turnover limit of up to Rs. 100 million. Arrangement has also been made to exempt industries that manufacture and assemble electric vehicle charging machines from income tax for five years from the date of commencement of business. 

It has adopted a policy of increasing the amount of financial transfers to the provincial and local levels. The implementation of the budget is highly likely to lead to long-term policy reforms. Policy has been adopted to utilise alternative development finance for policy reforms, and improvements in project management and procurement processes will increase capital expenditure. In addition, the policy of austerity and cost reduction has been implemented to limit current expenditure, which has been soaring past targets owing to increased administrative costs.  

Provision has been made for the provinces and local levels to bring a balanced budget. The planning document of income and expenditure also aims to address the chronic issue of abysmally low capital expenditure, the problem attributed to persistently falling short in planning, implementation, and resource management. When capital expenditure falls, demand for goods and services shrinks, reducing employment opportunities, delaying or stopping infrastructure, and casting a shadow over the business climate.      

What's more, to encourage the private sector to invest and facilitate investment in projects, it has introduced policies to support the production, innovation, and development of green hydrogen and attract investors, among other measures. Encouraging tax policy, growing environmental awareness, and an expanding charging infrastructure have all contributed to the surge in the adoption of EVs. By keeping the existing taxes and duties on such vehicles unchanged, the government aims to give continuity to this momentum, a step also crucial to increase the consumption of domestically produced hydroelectricity. This move will also go a long way to reduce environmental pollution, which has emerged as a serious issue recently.

Strong coordination among various government agencies is essential for its effective implementation, as is the three-tiered government working in tandem. Examples abound of how the dearth of such cooperation can lead to project delays, cost overruns and substandard outcomes. Bureaucratic and institutional inefficiencies have often stood in the way of budget implementation. This calls for a strong commitment, consistent policies and a conducive investment climate, as well as learning lessons from the past, if we are to see the ambitions of the budget translated into reality.