The National Planning Commission (NPC) has proposed a budget ceiling of Rs 1900 billion for the upcoming Fiscal Year 2025/26. The NPC presented the recommendation to the Ministry of Finance (MoF) on Tuesday, according to the Finance Ministry Secretariat.

The government had announced a budget of Rs 1860 billion for the current fiscal year, which was revised to Rs 1692 billion through the mid-term review. The upcoming budget ceiling is 12 percent more than the budget of the current fiscal year.

As per constitutional provisions, the government is required to present the national budget on Jestha 15 (May 29) each year. This regulation was introduced to streamline budget execution, as past administrations faced difficulties in effectively utilizing allocated funds on time. However, despite this mandate, inefficient budget spending continues, with a tendency to exhaust funds at the last minute.

The National Resource Estimates Committee, under the NPC, determines the budget ceiling annually. The purpose is to align the national budget with long-term plans while ensuring economic stability and sustainable growth. As per the recently-introduced legal provision through an ordinance, the committee must finalize the budget ceiling by mid-February, and the government is expected to adhere to this limit. In practice, however, this guideline is often disregarded.

Despite repeated commitments to announce the budget within the prescribed ceiling, successive governments have frequently unveiled inflated budgets containing unrealistic and politically driven programs. Ministries often submit proposals without adequate preparation, while political pressure influences the inclusion of projects that lack financial viability.

For the current fiscal year (2024/25), the NPC had set a budget ceiling of Rs 1800 billion, but the government exceeded this, with then-Finance Minister Barsha Man Pun announcing a budget of 1860 billion. A similar pattern was observed in FY 2023/24, when the then Finance Minister Prakash Sharan Mahat proposed a budget of Rs 1750 billion, surpassing the limit of Rs 1688 billion set by the NPC.

The trend of announcing larger budgets only to later downsize them continues unabated due to the government’s inability to utilize the funds efficiently as well as the challenges in revenue collection. This fiscal year, the government, through its mid-term review, downsized the budget to Rs 1692 billion from Rs 1860 billion, once again highlighting the gap between budgetary commitments and actual expenditure capacity.

Economist Dr Chandramani Adhikari noted that successive governments have been setting inflated budgets without properly assessing financial resources and estimates. He suggested that the government should formulate the budget by prioritizing projects from the project bank.