KATHMANDU: Stating the reconstruction of structures destroyed by vandalism and arson during the Gen Z movement, management of expenditure for elections, and making public expenditure frugal, the government made various decisions on expenditure cuts on September 21.

The Cabinet meeting of that day had decided to withdraw small projects, which were not entered into the budget information system and were of low importance, from the budget of the current fiscal year 2025/26. Along with that, a decision was also made to cancel the budget allocation for projects that lacked prior preparation, were outside their objective, and whose utility was not seen.

The government had specifically said that it would not implement small projects, with the intent of withdrawing schemes that former parliamentarians, political party leaders, and cadres had taken to their areas based on political access.

Stating that the Cabinet had decided to reprioritize development projects, cut unproductive expenditure, and maintain frugality for the reconstruction and maintenance of public structures, smooth operation of public services, management of election expenses, economic recovery, and relief, the Ministry of Finance published a press release on September 23.

Before that, on September 16, Rameshore Khanal, upon taking charge as the Finance Minister, had decided to form a task force to cut fragmented projects included in the current fiscal year’s budget.

Among those cut, there are also schemes whose budgets were allocated under political pressure and influence.

The task force, whose members were Suman Dahal, Chief of the Budget and Programme Division of the Ministry of Finance, Dhaniram Sharma, Chief of the Foreign Aid Coordination Division, and Uttarkumar Khatri, Chief of the Revenue Management Division, had prepared a list of fragmented schemes and programs that were not included in the budget information system, were included under political pressure, and whose prior preparation was incomplete.

Based on the report prepared by the task force, the Ministry of Finance has decided to cut an expenditure of Rs 119 billion from the allocation towards capital and recurrent expenditure of the current fiscal year’s budget.

Tanka Prasad Pandey, Joint Secretary and Chief of the Planning, Monitoring, and Evaluation Division of the Ministry of Finance, states that a decision was made not to implement projects in the current fiscal year that were cut, which lacked prior preparation, could also be implemented by local levels, and were fragmented schemes.

Among those cut, there are also schemes whose budgets were allocated under political pressure and influence. Indeed, while formulating the budget for every fiscal year, big leaders of political parties, their cadres, and influential individuals used to dominate the budget and development plans.

The trend was that the budget was allocated to projects they chose and recommended, but did not go to highly necessary sectors and schemes. There was intense criticism at the public level that the leaders of the ruling party monopolized the budget. Although the government had made a policy to allocate the budget only to schemes submitted to the Project Bank to systematize development programs, that policy only worked in the situation where the budget was not wanted to be given.

In the current fiscal year, the Ministry of Urban Development had the highest budget allocation for fragmented projects across the country.

The National Planning Commission had made a standard not to include projects smaller than Rs 30 million in the federal budget. The ‘National Project Bank Standard–2024’ has been implemented, stating that fragmented and small projects should be implemented by provincial and local levels themselves.

Even while formulating the current fiscal year’s budget, the then-Finance Minister Bishnu Paudel had told the parliament that the federal government had not given a budget to projects smaller than Rs 30 million. However, the practice was exactly the opposite. Schemes worth even Rs 1,000 were also included in the budget. It is the right of the citizens to be able to benefit from the proportional distribution of development.

The constitution has also ensured the proportional distribution of resources and means. The determination of the proportional distribution of development is done by the budget distribution itself. However, the budget used to be formulated based on the preferences of leaders and influential individuals.

Due to which, the situation is that the budget floods into the areas of people who have access to state resources, and the budget does not go to where even minimal development has not reached.

Where and how much budget was cut

The government had allocated Rs 1.964 trillion for the current fiscal year. Out of that, Rs 1.181 trillion was allocated for recurrent expenditure and Rs 407.9 billion for capital expenditure. The Ministry has stated that out of the allocation, Rs 114 billion has been cut from the capital expenditure side.

In the current fiscal year, the Ministry of Urban Development had the highest budget allocation for fragmented projects across the country. Now, the budget of the same ministry has been cut the most.

This year, the largest budget was allocated to the districts of influential leaders through the Ministries of Urban Development and Physical Infrastructure and Transport. According to details received from the Ministry of Finance, Rs 64.201 billion has been cut from the capital expenditure of the Ministry of Urban Development.

The budget of Rs 690 million for the Damak–Gauradaha–Gauriganj Link Programme in Jhapa, the home district of former Prime Minister KP Sharma Oli, and Rs 480 million for the Link Road Programme in Dadeldhura, the home district of former Prime Minister Sher Bahadur Deuba, has been cut.

Budgets allocated to the Integrated Urban Development Programme, New City Project, Settlement Development Programme, and the sectoral program for suspension bridges have also been cut. Some programs recommended by leaders were included in the budget under the Settlement Development Programme.

Out of the amount allocated for the Settlement Development Programme, Rs 33.917 billion has been cut. The Ministry of Finance’s details also state that Rs 1.124 billion from the budget of the Kathmandu Valley Development Authority has also been cut.

Due to the current budget cut, the capital budget of the Ministry of Physical Infrastructure and Transport has decreased by Rs 19.761 billion. Schemes worth Rs 1.3 billion allocated for local roads and bridge construction have been removed.

The budget of Rs 690 million for the Damak–Gauradaha–Gauriganj Link Programme in Jhapa, the home district of former Prime Minister KP Sharma Oli, and Rs 480 million for the Link Road Programme in Dadeldhura, the home district of former Prime Minister Sher Bahadur Deuba, has been cut.

The government has cut the budget to the extent that the 10th National Sports Competition itself may be cancelled. The Ministry of Finance has stated that Rs 2.776 billion has been cut from the budget sent to the National Sports Council through the Ministry of Youth and Sports.

Recurrent expenditure cut by five and a half billion

To reduce recurrent expenditure, the government has decided to halt the funds allocated for new activities and programs whose operating modality is not clear, whose expected outcomes are not ensured, or which are unproductive programs.

Due to the expenditure cuts made by the government, there will be a decrease in the organization and operation of various government assemblies, training sessions, and seminars. The details provided by the Ministry of Finance state that Rs 5.433 billion has been cut from the recurrent expenditure allocated by the government. Rs 1.455 billion has been cut from the amount allocated for various bodies to organize programs.

Economists are of the opinion that the decision currently made by the government will make government expenditure frugal, help stop the exploitation of state resources, and will not affect the economy.

Rs 620 million has been reduced from the budget allocated for recurrent expenditure for government bodies, committees, and boards. Out of the amount allocated for development and construction (capital) expenditure in those same bodies, Rs 3.205 billion has been cut.

To make government expenditure frugal, the Cabinet has decided not to provide meeting allowances to public body officials and employees for regular work.

Similarly, a decision has been made that the budget allocated for work that can be done by the existing manpower cannot be utilized to get work done by external service consultants.

Officials of the Ministry of Finance state that the government has cut the budget in a way that the work of infrastructure development is not affected and the regular activities of the government are also not halted.

Economists are of the opinion that the decision currently made by the government will make government expenditure frugal, help stop the exploitation of state resources, and will not affect the economy.

Economist Homnath Gaire says, “Previously, the budget was allocated and spent based on political access, now many have the expectation that the expenditure will only happen where it is needed.” Gaire states that the government must be able to create a situation where state resources are spent for the general public by stopping the intervention of limited individuals.

He says, “A situation has been created to divert the state’s resources, which were spent in the interest of limited individuals, to the welfare of the general public. But, the budget cut in that way must be spent, otherwise, it will not benefit the economy.”

Officials of the Ministry of Finance state that the government has cut the budget in a way that the work of infrastructure development is not affected and the regular activities of the government are also not halted.

However, Chandramani Adhikari, an economist and former member of the National Planning Commission, comments that the Finance Minister is attempting to become popular by deciding to cut the budget. He says, “Projects without prior preparation are not implemented at all. The budget has been decreased every year through the mid-term budget review. This issue would have naturally arisen in the budget review scheduled for February. The work done by the Finance Minister now is theoretically fine, but it is not a big deal.”

He is of the opinion that instead of cutting the budget of development projects while making cuts, the government should reduce the recurrent expenditure it spends extravagantly. “There is no meaning in cutting other budgets while keeping a large budget under the miscellaneous heading of the Ministry of Finance,” he says.

“Even now, the country’s economic development is seen to be in a declining state. If elections are not held, there is a situation where economic growth will go below one percent. At such a time, expenditure needs to be increased, and for that, development and construction works must be rapidly moved forward.”

Economist Adhikari states that at a time when monitoring and inspection of projects should be increased, corruption should be prevented, and work should be rapidly carried out, the government has done publicity-oriented work by cutting the budget of development projects itself.