February 13: The government has downsized the budget due to its failure to spend the allocated budget in the current fiscal year 2019/20.
In its mid-term review, the Ministry of Finance on Wednesday (February 12) announced the reduction in size of budget by 10 percent. The ministry has also set new targets for expenditure, revenue collection and foreign assistance.
Speaking at a press conference on Wednesday, Finance Minister Yuba Raj Khatiwada said that the government has reduced the annual budget from Rs 1.53 trillion to Rs 1.38 trillion.
Finance Minister Khatiwada clarified that the government reduced the size of the budget as it expects to spend only 90 percent of the total budget which was announced before the start of the current fiscal year.
The government expects to spend Rs 904 billion in recurrent expenditure and Rs 326 billion in capital expenditure. Likewise, the target of financial management expenditure has been set at Rs 154 billion, Khatiwada said.
The finance ministry has also reduced its target of revenue collection. The government expects to collect 95 percent of revenue target it had set in the budget. The ministry estimates that the government will raise Rs 1132 billion through revenue and internal loan. The government has also set a new target of mobilizing Rs 2.53 received in foreign assistance.
Although the government had initially said it would collect revenue worth Rs 981 billion, it has now revised the figure to Rs 888 billion.
The current government has been downsizing the budget after it failed to spend as per the initial target. Finance Minister Khatiwada had reduced the size of budget in the last fiscal year as well.
Las year, the finance minister had announced an annual budget of Rs 1.31 trillion, which was later reduced to Rs 1.19 trillion during the mid-term review.
“The government had set a highly ambitious target. Reviewing the target, even though quite late, is a positive sign,” said economist Keshav Acharya.
According to him, Finance Minister Khatiwada has failed to improve the system of expenditure.
“The finance minister should have made an attempt to find out why the budget has not been spent and then addressed the issue. But he failed to do so,” said Acharya.
Although the government has downsized the budget, it has not wavered from its target of economic growth. Acharya argues that there isn’t any logical ground for the government to meet its target of economic growth when it has reduced the size of the budget and also the capital expenditure.
“The economy of neighbouring India has shrunk and China is facing coronavirus epidemic. In such a scenario, it seems quite difficult for the government to achieve its target of 8 percent economic growth,” said Acharya.