Economic growth target is 6%, inflation to be contained at 5.5%

By Our Reporter

Deputy Prime Minister and Minister for Finance Bishnu Prasad Paudel has unveiled a budget of Rs. 1,964.11 billion for the upcoming Fiscal Year 2025/26.

The budget unveiled on Thursday last week depends on debt as the country is now facing resource shortages to manage the budget.

Of the total allocation, Rs. 1,180.98 billion (60.1 per cent) is allocated for recurrent expenditure, Rs. 407.89 billion (20.8 per cent) for capital expenditure, and Rs. 375.24 billion (19.1 per cent) for financing arrangements.

This estimated expenditure is 5.6 per cent higher than the allocation for the current fiscal year and 18.2 per cent higher than the revised estimate.

The size of the budget for the current FY 2024/25 is Rs. 1,860.40 billion. Likewise, sectoral allocations include Rs. 1140.66 billion (61.31 per cent) for recurrent expenditure, Rs. 352.35 billion (18.94 per cent) for capital expenditure and Rs. 367.28 billion (19.74 per cent) for financing.

The budget for this year is 6.2 per cent higher than last year’s budget, while it is higher than 21.56 per cent of the revised estimates.

Out of the total allocation for the next fiscal, Rs. 417.83 billion has been earmarked for fiscal transfers to provincial and local levels.

Among the sources to cover the estimated expenditure for the upcoming fiscal year, Rs. 1,315 billion will be raised through revenue and Rs. 53.45 billion through foreign grants, leaving a deficit of Rs. 595.66 billion.

To cover this deficit, Rs. 233.66 billion will be raised through foreign loans. The remaining shortfall of Rs. 362 billion will be managed through domestic borrowing.

However, collecting Rs. 595.66 billion from foreign and domestic debts is not an easy job. Equally impossible will be to raise Rs, 1315 billion from revenue.  With the high dependence on loans, the per capita loan of Nepalis will surely go up again.

The shortage of resources has persisted over the years, which is evident in the identical scenario in the budget of 2024/25 as well. This year, there is a budget deficit of Rs. 547.67 billion, and the government plans to raise Rs. 217.67 billion from foreign loans and Rs. 330 billion from domestic borrowings.

Through the budget, the government aims to achieve an economic growth rate of 6 per cent while inflation will be contained within the limit of 5.5 per cent.

The new budget has accorded priority to education, home affairs, physical infrastructure and health.

Through the budget, the government has removed 4,654 development projects that found their entry to the budget of this year to streamline project management.

On Monday, DPM Paudel defended his budget stating that it is based on ground reality. Speaking at a discussion programme organised by the Economic Media Society Nepal (EMSON) on Monday, Minister Paudel emphasised that he opted for discipline and pragmatism over political popularity in shaping the national budget.

To cut down the expenditures, the age threshold for receiving senior citizen allowance has been increased to 70 years. No foreign visits at government expense would be permitted except in cases of high-level diplomatic visits or mandatory representation in international organisations which Nepal is a member.

The budget proposes to give high priority to legal, policy and procedural reforms necessary to promote private investment and create employment by improving the business environment.

The private sector has also hailed the budget for its pro-private sector provisions.