February 26: The budget for the next fiscal year is certain to decline after the National Planning Commission (NPC) capped the ceiling on budget citing government’s failure to collect revenue.

The NPC has set the limit of Rs 1688.4 billion for next year’s budget which is less than the current fiscal year’s budget by almost 150 billion. The then finance minister Janardan Sharma had announced a budget of Rs 1793.83 billion for the current FY.

A recent meeting of the National Resource Estimation Committee of the NPC chaired by its Vice Chairman Dr Min Bahadur Shrestha decided to downsize the budget and asked the government to work accordingly.

Deputy Prime Minister and Finance Minister Bishnu Prasad Paudel has reduced the size of the budget announced by his predecessor Sharma as the government failed to collect revenue according to the initial target.

As per the revised estimated prepared by Finance Minister Paudel, the government will likely spend only Rs 1549.99 billion this year and the budget was downsized accordingly. Compared to this figure, the budget limit for the next fiscal year is Rs 138.41 billion more.

The NPC has estimated that the government will collect revenue of Rs 1403 billion for next year's budget. This revenue estimate is about 14 percent more than what will be collected in the current fiscal year. It is estimated that Rs 201 billion will be received from foreign assistance for next year's budget, of which Rs 25 billion will be received as grants and Rs 176 billion as loans.

The commission has estimated that the remaining amount will be collected through internal loans of Rs 230 billion.

Analyzing the contraction seen in revenue mobilization in the first six months of the current fiscal year, the decline in subsidies in foreign aid and the increase in the foreign exchange rates which might put pressure on payment of loan, the NPC has made a realistic estimate and projection of national resource mobilization," said Rajendra Kumar Paudel, the spokesperson of the commission.

According to the commission, the limit has been fixed by keeping the mandatory obligations including salaries, pensions, social security and the implementation status of multi-year projects of national importance, supply of chemical fertilizers, expenses related to the implementation of international commitments, financial transfers among others. The NPC has estimated that next year's economic growth rate will be 8 percent, per capita income will reach USD 1,572 and consumer price inflation will be 6.5 percent.

As the size of current fiscal year’s budget is large, the government’s resources are not able to meet the revenue collection target.

The economy has been facing liquidity crisis due to the impacts of the Covid-19 and Russia-Ukraine war. This has caused many problems in the economy. This has forced the government to reduce the size of the budget for the upcoming fiscal year.