Essential Austerity

The Ministry of Finance, after the formation of a new government in the aftermath of the Gen Z movement in early September, has taken a long-overdue corrective step in Nepal's public spending sphere. Within a month of assuming office, Finance Minister Rameshore Khanal, recognised as a capable administrator, has taken a courageous action to curb unnecessary expenditures that have drained state resources and weakened the foundation of good governance for years.

The successive political-party-led governments made similar commitments but hesitated on implementation due to the pressures of political parties and cadres, and also fulfilled their own vested interest to win elections in the coming years. They not only expressed their commitment, but also formed a commission to make recommendations for spending reform and received a report, but that report was not effectively implemented. But the current interim government appears committed to moving ahead as per the mandate of the Gen Z movement and their voices. The young generation raised their voices for good governance, corruption control and efficient public service delivery.

Previous governments, when presenting their budgets, not only allocated the budget haphazardly without concrete plans and preparations, but also transferred the budget to areas of their own interest and their political motives at the end of the fiscal year, after there was no expenditure.  On one hand, this resulted in a shortage of funds for ongoing projects, and on the other, the government was forced to borrow to cover expenses. So the public debt of the government reached Rs. 2,724 billion by mid-October 2025.

The decision to postpone over 1,200 scattered, unnecessary and politically motivated projects worth Rs. 120 billion is a significant breakthrough for the present government. These initiatives, often presented without proper planning or relevance to national priorities, have burdened development budgets and hindered strategic investments. Equally significant is the return of over 1,000 security personnel and 30 vehicles being used by former officials who were enjoying benefits beyond legal provisions. This move not only restores fiscal discipline but also sends a message against the established culture of power. This initiative also supports the government in managing resources to hold the upcoming House of Representatives (HoR) election. 

The present government has also taken steps to reduce the recurrent expenditure. Prohibiting unnecessary advisors, restricting new equipment purchases, eliminating meeting allowances for routine work, and limiting advisors and personal secretaries to just key officials are expected to control unproductive spending and establish a disciplined approach to governance. If unnecessary public expenditure is reduced, the savings can be used for development activities, where the government currently faces a significant resource gap. While low allocation of the budget is becoming a challenge for development, weak spending capacity has added to the problems. Of the total budget, the capital budget accounts for only 21 per cent, while recurrent expenditure accounts for 60 per cent and financing accounts for 19 per cent.

Increasing investment in development works to improve public infrastructure will ultimately enhance service delivery and contribute to making the country more prosperous. Therefore, the current austerity campaign is a promising start. If the campaign is sustained, it could promote a culture of fiscal discipline, restore trust in public institutions, and pave the way for more honest, efficient, and accountable governance. The cutting of inappropriate spending is not just an economic necessity; it is a moral imperative for a nation striving for stability and progress. The government formed through the upcoming elections should also follow current steps to control unnecessary spending and utilise funds where they are most in need.