Govt revises budget downward by 14.06 percentage points in mid‑year review
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KATHMANDU: The government has revised downward both revenue and expenditure estimates for current fiscal year 2025/26 following a mid‑year review, the Ministry of Finance said today in its half‑yearly budget assessment report.
The government had initially presented a budget of Rs 1,964.11 billion for the current fiscal year, allocating Rs 1,180.98 billion for current expenditure, Rs 407.88 billion for capital expenditure and Rs 375.24 billion for fiscal management.
According to the revised estimates, current expenditure has been reduced to Rs 1,125.97 billion, capital expenditure to Rs 243.30 billion and fiscal management to Rs 319.04 billion. With these adjustments, the total size of the budget has been revised to Rs 1,688.32 billion, which is 85.96% of the original allocation, representing an overall reduction of 14.06 percentage points.
Out of the initial budget of Rs 1,964.11 billion, revenue mobilisation was estimated at Rs 1,480 billion. Of the total projected revenue, Rs 1,315 billion is earmarked for federal government expenditure, and Rs 165 billion will be allotted to provincial and local governments through revenue sharing, meaning revenue is expected to finance about 67.49% of the total federal budget.
For fiscal year 2025/26, tax revenue is estimated at Rs 1,325.58 billion, accounting for 89.57% of total revenue, while non‑tax revenue is projected at Rs 154.41 billion, or 10.43%. Of the total tax revenue, direct taxes are estimated at Rs 407.03 billion and indirect taxes at Rs 918.55 billion, with direct taxes constituting 30.70% and indirect taxes 69.30% of total tax revenue.
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The Ministry of Finance said the budget has been revised with the target of achieving 6% economic growth in the current fiscal year and limiting consumer price inflation to 5.5%.
The report cites the adverse situation following the Gen-Z protest on September 8 and 9 last year, the re‑prioritisation of projects and the Cabinet’s decision to cut expenses as the basis for the revised estimates. It adds that current expenditure has increased because of costs related to the upcoming House of Representatives(HoR) election, social security spending, employee dearness allowances and relief for the families of those injured and deceased in protests.
“The quality of capital expenditure has not improved as expected due to the lack of preparation for the event, difficulties in land acquisition and the use of forest areas, and delays in payment to contractors,” the report states. It says main expenditure priorities are reconstruction of physical structures damaged by the movement, payments for strategic projects under construction, and mandatory obligations such as salaries, allowances and pensions.
The Finance Ministry has adopted a policy to withhold budgets for unprepared, fragmented and unproductive programmes with uncertain outcomes and to redirect funds to priority projects. It also aims to control current expenditure by measures such as not providing meeting allowances, not engaging external consulting services, restricting foreign visits and not creating new posts.
High priority has been given to agreeing on the source of, and managing the necessary budget for, security agencies and the Election Commission for the HoR election to be held on March 5. Considering a decline in foreign aid and pressure on revenue collection, the ministry says it is seeking to maintain budget balance by maximising the use of domestic resources, including revenue and domestic debt.
To make the budget system more results‑oriented, the report states the government will implement project banks, expand digital payment systems and carry out timely reforms in public procurement law.
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