Government Set to Breach Budget Ceiling Amid Increased Financial Demands

KATHMANDU:  The government appears poised to exceed the budget ceiling of Rs 1.8 trillion set by the National Planning Commission (NPC) for the upcoming fiscal year, with plans to push the limit to over Rs 1.9 trillion.

The National Resource Estimates Committee (NREC), operating under the NPC, has initiated steps to revise the budget ceiling upwards.

This decision comes in the wake of instructions from Prime Minister Pushpa Kamal Dahal, who directed the commission to increase the ceiling to Rs 1.9 trillion. The initial upper threshold of Rs 1.8 trillion was established by the committee on February 13 under the leadership of NPC Vice-Chairman Min Bahadur Shrestha.

An NPC official revealed that the NREC is responding to significant pressure from PM Dahal. “With the Ministry of Finance receiving funding requests exceeding Rs 2 trillion from various line ministries, PM Dahal seems to have succumbed to this pressure,” the source stated.

According to legal requirements, the NREC must set the budget ceiling for the following fiscal year by mid-February annually. The government is legally bound not to exceed the limit prescribed by the NPC’s authority.

The originally set ceiling of Rs 1.8 trillion aimed for Rs 1.27 trillion from revenue collection, Rs 260 billion from foreign aid and grants, and Rs 270 billion through internal borrowings.

However, the recent revision has increased the government’s allowance for internal loans to 5.5 percent of the country’s GDP, up from the previous 4.5 percent. This change permits the government to secure internal loans up to Rs 310 billion.

Finance Minister Barshaman Pun has consistently advocated for adhering to the NPC’s budget ceiling, but PM Dahal’s intervention has put pressure on the commission to exceed this limit.

The government’s budget announcement for the fiscal year 2024/25 is scheduled for May 28. Currently, the government faces a financial crunch due to inadequate revenue collection and is under pressure to reduce unproductive expenditures.

Projected revenue collection for the current fiscal year is expected to fall short of Rs 1 trillion. Despite this, the government aims to increase the revenue target by 29 percent, setting an ambitious goal of Rs 1.29 trillion for the next fiscal year.

As the government navigates these financial challenges, the proposed budget revision underscores the ongoing tension between fiscal discipline and meeting the financial demands of various ministries and development projects.