Highlights on the Government Budget of Nepal for the Fiscal Year 2023/24

by Nirajan Basnet

The constitutional requirement obliges the government to disclose the budget on Jestha, 15 each year. By considering the fact, government has released the budget with the size of Rs 17.51 Kharba for the fiscal year, on Monday 29^th may 2023 ( Jestha 15). Finance Minister Dr. Prakash Sharan Mahat allocated Rs 11.41 Kharba (65.20%) in recurrent expenditure, Rs 3.02 Kharba (17.25%) in capital expenditure, Rs 3.07 Kharba (17.55%) in financial management under the economic classification of budget. The size of the budget is smaller than the previous year by 2.37 percent. It is announced within the ceiling set by the National planning commission. But, the amount of financial management is bigger than capital expenditure.

Finance Minister, Dr. Mahat has mentioned the major three sources of revenue i.e. tax revenue, foreign assistance and internal borrowing. Tax revenue of Rs 12.48 Kharba, foreign aid of Rs 49.94 Arba and foreign loan of Rs 2.12 Kharba would be collected and Rs 2.40 Kharba from internal sources of borrowing. It could be taken as departure from the past. The structure of revenue and expenditure are as follows:

The budget has given consideration on the prosperity of the country and poverty eradication. It has addressed various issues with emphasizing sustainability and inclusiveness. These budgetary measures aim to foster inclusive growth, promote sustainability, and address the pressing challenges faced by Nepal. With a comprehensive approach, the government is determined to steer the nation towards a prosperous future while ensuring social welfare and environmental factor. The budget has heavily prioritized on agriculture sector and Rs30 billion has been set aside to subsidize chemical fertilizers.

The government has set the target of growth rate of 6 percent and aims to keep inflation within 6.5 percent. They are quite ambiguous in the current national and international economic situation.  It has given priority to reduce the gap between the rich and the poor in the society. The government has aimed to create a more equitable society through the execution of different programs and policies. It has focused on reducing government expenditure to rationalize operations and enhance efficiency. Under the objective, government has declared to dissolve 20 government institutions and merge similar types of government bodies.

Dr. Mahat has stated that the budget stretches progressive move towards digitalization, e-Bidding in all government offices ensuring transparency and efficiency in public procurement processes. Scrapped government vehicles will be auctioned within six months and acquisition of new government vehicles, furniture, and buildings will be halted. Cash allowances will be provided for the government employees instead of fuel facilities.

The budget also introduces measures to encourage sustainable development. The cultivation of cannabis for medical purposes will be explored, and the promotion of briquette industries will reduce dependency on coal. The use of cement for government roads will be promoted to reduce imports of bitumen. Infrastructure fund will be established with the participation of foreign investors for economic growth and attraction of foreign investment. 1% of the total budget will be allocated to create fund to boost science, technology, innovation and research in the country.

The budget has announced awards and incentives for the farmers to encourage agricultural development. Moreover, the entry barrier for establishing a company has been significantly lowered with companies now being able to register with just Rs. 100 in issued paid-up capital without any charge for registration or capital increment.

The budget has also addressed social and environmental issues. Efforts will be made to regulate real estate business through scientific evaluation system, and approvals for Environmental Impact Analysis (EIA) proposals will be accelerated. Land certificates will be given for landless individuals by applying the measures to integrate the authorities of Napi and Malpot gradually. Environmental sustainability remains a key priority, with provisions to discourage the use of plastic bags and junk food in government schools. Initiatives such as operating a Milk Bank for newborn babies and implementing the “Now Life at Home” policy to prevent youth migration abroad reveals the government’s commitment to social welfare.

The government has declared the years 2023-2033 as the Tourism Decade, with a focus on promoting Nepal as a prime tourist destination. Rules and legislation will be endorsed to facilitate the sale of Nepali goods and services through e-commerce platforms. The budget also allocates resources for the development of sports facilities, including the construction of the international standard cricket ground in Kritipur and the establishment of the Girija Prasad Koirala Cricket Stadium in Biratnagar. Moreover, the government aims to improve the country’s credit rating, construct the Federal Parliament house, and tackle unauthorized settlements along the banks of the Bagmati and Bishnumati rivers.

There is continuation of the old age allowance, ensuring accessibility to electricity for the entire population within two years, and restructuring the Digital Nepal Framework to enhance connectivity and digital services. Non-Residential Nepalis (NRNs) will be permitted to invest in selected sectors of Nepal’s share market, contributing to the country’s economic growth. The divestiture strategy for government-owned companies like NTC will be explored to encourage private sector participation. In support of sustainable transportation, charging stations for electric vehicles will undergo expansion across the entire nation. According to the budget statement, there will be no procurement of new vehicles by the government, no construction of new buildings except the most essential ones. Unnecessary foreign trips will be prohibited.

There is mixed opinions of economists regarding the budget. The budget has some positive sides such as priority on agriculture and expenditure cut down but it has not addressed the core problem of economic slowdown. The collapse in tax revenues is one of the major challenges that policymakers confronted for this fiscal year again.

Pushkar Bajracharya stated that government has not acknowledged that the country is in crisis and failed to address pressing problems. If the ongoing crisis is not dealt on time, it could push the country to the brink. He further added that budget funds have been scattered on frivolous programmes that could be counter-productive.

Insiders say that entrepreneurs have shuttered their shops and are seeking overseas jobs. The private sector including the media industry, manufacturing, construction, wholesale and retail is expected to have a contraction in the current fiscal year. A series of events ranging from political paralysis, hiking inflation and mounting corruption is pushing Nepalese economy into the deeper crisis. The country’s economy has long been characterized by an appallingly corrupt set of policies designed to provide subsidies to the elite while neglecting the vast majority of the population. This trend has continued, insiders say. Defense expenditure has witnessed a rise.

The budget is expansionary and keeping inflation at 6.5 percent is a patronizing dream. Inflation is the common enemy of the ordinary people. Like in previous years, there will be a revision of budget during the mid-term review as the government has no capacity to spend which is the common problem in each year. The budget has addressed the difficulties of the private sector to some extent, but it won’t boost its morale as Nepal is always overwhelmed with political uncertainty.

The finance minister, who has long been talking about boosting the morale of the private sector amid the economic downturn, has announced a number of measures to promote domestic production and employment. The government will launch the National Production and Employment Promotion Programme at the local level with a focus on the commercialization of agriculture, promotion of small and micro enterprises and development of information technology and tourism. Production and Consumption Growth Programme has also been announced to promote micro to medium-scale enterprises in agriculture, garment, footwear and pharmaceuticals.

In Nutshell, the budget is announced during the period of economic turmoil within and outside the country. There are lots of challenges for implementation. The main problem in implementation part will be the resource constraints. Revenue target is very high. Due to removal of all types of incentives and overtime payments in government offices may discourage the civil servants in their duty. They may not cope with government.

Written by

Nirajan Basnet

Assistant Prof. of economics

Faculty of management, T.U.

Kirtipur.