May 8: The government has indicated it will announce a large-sized budget for the upcoming fiscal year even though it is currently struggling to meet the revised revenue collection target.

The resource committee chaired by the vice-chairman of the National Planning Commission had recommended a budget ceiling of Rs 1800 billion for the upcoming fiscal year.

However, speaking at the parliamentary party meeting of the CPN (Maoist Center) on Saturday, Prime Minister Pushpa Kamal Dahal said that the government is moving ahead  to introduce a budget equal to Rs 1900 billion, a leader of the party informed New Business Age.

"The prime minister has hinted that we are under pressure to bring a large-sized budget to keep the economy afloat," said MP Madhav Sapkota of the Maoist Center.

As soon as the investment summit was over, Finance Minister VBarshman Pun has started intensifying discussions for preparing the budget, indicating that the size of the budget will exceed the limit fixed by the NPC.

Finance Minister Pun has already discussed the budget with former finance secretaries, industrialists and bankers. The government has already formed a committee under the leadership of joint secretary Dhaniram Sharma for drafting the budget for the upcoming fiscal year by incorporating the suggestions received from various stakeholders.

However, the confusion about reducing the size of the budget still lingers.

An officer involved in the drafting of the budget told New Business Age that they were under pressure to prepare a large-sized budget due to the prime minister's aspiration to bring an ambitious budget.

"There will be a lot of pressure to raise resources if the size of the budget is increased,” he said.

According to the officer, the work has already progressed to determine the priorities of the budget and which program to include, but the size of the budget has not been decided yet.

Every year, the Ministry of Finance gets requests for more budget than the limit set by the resource committee of the NPC.

The size of the budget is usually larger than the limit because the government has to include projects of political interest.

According to the constitutional provision, the government has to present the budget for the upcoming fiscal year on May 28.

Finance Minister's Senior Economic Adviser Dr Surya Bahadur Thapa has hinted that the budget may increase as various ministries have expressed dissatisfaction with the limit set by the resource committee.

"Physical infrastructure, urban development, energy and other ministries are dissatisfied with the budget ceiling. This has created pressure on increasing the size of the budget," he said.

Increasing the size of the budget will increase the challenge of raising resources for the government.

The National Statistics Office has recently estimated that the economy will grow by only 3.87 percent in the current fiscal year due to sluggish economic activities. According to the World Bank and the Asian Development Bank, there is no possibility of a high growth rate of the economy in the next fiscal year as well. The World Bank and the Asian Development Bank have estimated that Nepal's economic will grow by 4.6 percent and 4.8 percent respectively in the next year.

In the absence of high economic growth, the government will have to face the challenge of raising revenue. Since the growth rate of revenue was also high in the past, when the government increased the size of the budget, there was less concern about lack of resources. However, after the onset of the coronavirus pandemic, the government has not been able to raise revenue as per the target. The government has had to rely more on internal and external loans to raise resources.

This year too, the government has not been able to raise revenue as per the target. Although the budget has set a target of collecting revenue of Rs 1422.54 billion in the current fiscal year, the half-yearly review of the budget has estimated that the revenue collection will be limited to Rs 1202 billion. The Financial Comptroller General Office has said that the revenue collection stood at Rs 804 billion as of Monday. It seems that it will be difficult to collect revenue as per the revised estimate as there is a shortfall of Rs 400 biillion which needs to be collected in the next two months.

At present, the budget deficit has exceeded Rs 200 billion. Economist Keshav Acharya says that when the government is struggling to meet the budget of Rs 1500 billion in the current year, increasing the size of the budget for the next fiscal year is not appropriate.

According to him, instead of introducing a large-sized budget for the next fiscal year, it should be implementation-oriented by taking care of the resources.

According to sources at the Ministry of Finance, the government has not achieved the target of collecting foreign loans and grants so far this year. There is no basis for meeting the target in the next two months.