Finance Minister Khanal wields the budget scissors to rein in government spending

KATHMANDU: Finance Minister Rameshwor Khanal has initiated sweeping austerity measures to curtail recurrent government expenditure, introducing one of the boldest budget control strategies in recent years. The move comes amid mounting fiscal pressures created by upcoming general elections, reconstruction demands, and relief programs following the destructive Gen Z movement that left infrastructure and public property in ruins.

Capital Budget on Hold, Recurrent Cuts Across the Board

While the capital budget for large-scale, priority-driven projects remains intact, Khanal has announced that allocations for small, fragmented projects will be frozen. In recurrent expenditure, several reforms and direct cost-cutting measures have already been rolled out. According to Khanal, these measures are expected to free up resources worth around NPR 1.2 trillion (120 billion rupees), ensuring that the government can fund elections and reconstruction without additional borrowing or financial stress.

The Cabinet meeting of October 21 (5 Ashoj) endorsed the proposal, emphasizing re-prioritization of development projects, elimination of unproductive spending, and strict adherence to fiscal discipline.

No More Meeting Allowances and Housing Perks

In a significant cultural shift for the bureaucracy, government employees and officials will no longer receive allowances for regular meetings. Only committee meetings conducted outside office hours and mandated by law will be compensated.

Likewise, officials already using government-owned, private, or family-owned residences will not receive additional housing allowances. The government has also prohibited renting houses in expensive commercial areas or along major highways unless absolutely necessary.

Insurance for Public Infrastructure

One of the most forward-looking decisions is the initiation of insurance coverage for government infrastructure. The Gen Z protests saw widespread destruction of public property, and in the absence of insurance, the state bore the full cost of reconstruction. The new measure aims to mitigate future liabilities while fostering a risk-management culture within public institutions.

No More Duplication in Bureaucracy

The government will not create new permanent posts except for urgent technical manpower needs. Ministries have been instructed to carry out organizational audits to reduce bloated structures, streamline staff allocations, and eliminate inefficiencies. Contractual and temporary hiring has been strictly restricted across all three tiers of government.

Ministers and senior officials will also be barred from appointing advisors at will. Even secretarial staff for officeholders will be limited, with a maximum of three individuals allowed in any official secretariat.

Restriction on Foreign Visits and Seminars

Unnecessary foreign trips, seminars, and training sessions at government expense have been banned. Essential training must now be conducted in government halls or through online platforms. For unavoidable international representation, delegations will be capped at 10 members, even when led by the President or Prime Minister.

Structural Revisions in Ministries

The National Investigation Department has been brought back under the Home Ministry, while the Department of Revenue Investigation and the Department of Money Laundering Prevention have been reinstated under the Ministry of Finance. These bodies had earlier been shifted under the Prime Minister’s Office during the KP Sharma Oli administration.

Limited Investment in Public Enterprises

The government has adopted a strict stance against unproductive public enterprises. Future equity or loan injections will only target projects with proven returns, foreign-aid-backed initiatives, or those serving direct public obligations. Enterprises unable to service debt or deliver dividends will be barred from raising additional funds through rights issues or follow-on public offerings.

One Vehicle Per Official, No New Luxury Purchases

Officials entitled to government vehicles will now be restricted to one vehicle only. Ministries are instructed to reallocate vehicles within their existing fleets to replace damaged units, eliminating the need for new purchases except for unavoidable election-related requirements. All government vehicles will also undergo comprehensive insurance coverage.

At the same time, extravagant purchases of electronics, luxury furniture, and distribution of consumer goods such as gas cylinders, saris, or handpumps under political budgets have been scrapped.

Communication and Media Coordination

Press coordination will now rest solely with designated spokespersons and information officers of each ministry or agency. Additional staff or politically appointed media coordinators will no longer be entertained.

Big Projects Protected, Fragmented Ones Frozen

While small, redundant, and politically motivated projects have been frozen, large-scale projects with prior resource commitments will continue to receive funding. Fragmented, consumer-committee-led projects valued above NPR 1 million, often used for political patronage, will be terminated. Instead, these will be executed directly through provincial and local governments or professional contractors.

Fiscal Prudence in the Face of Crisis

With Nepal operating on a national budget of NPR 19.64 trillion for the current fiscal year, the government’s ability to channel funds toward high-priority needs without widening deficits or resorting to heavy borrowing will be key. Finance Minister Khanal’s decisions, largely based on recommendations he himself made to the former High-Level Economic Reform Commission, reflect a philosophy of tackling inefficiency at its roots.

By curbing unproductive expenditure, tightening perks for officials, enforcing insurance, and halting fragmented projects, the government aims to strengthen fiscal resilience and restore public trust in state spending practices.