FinMin Khanal Rolls Out Austerity Drive

Finance Minister Rameshore Khanal has taken a firm stance on fiscal discipline, unveiling a comprehensive set of austerity and cost-cutting measures designed to streamline government spending and focus resources on essential public services.

Following Cabinet approval of Khanal’s proposals on September 21, the Ministry of Finance issued a circular directing federal ministries, provincial governments, and local bodies to implement the measures immediately. The directives target unproductive expenditure, rationalize public infrastructure projects, and ensure frugality in government operations.

Under the new rules, additional offices and vehicles for political secretariats, luxury purchases, and distribution-focused programs have been discontinued. No advisors will be appointed for officials at the federal, provincial, or local levels, except for the President, Vice President, Prime Minister, Speaker of the House of Representatives, and Chairperson of the National Assembly.

Facilities previously extended to personal secretaries of political leaders, including Members of Parliament, will be axed, except for those serving the nation’s top political offices, provincial heads, and federal or provincial ministers. Personal secretariats of federal and provincial ministers and provincial heads will be capped at three staff members.

Political and administrative officials will be limited to one government vehicle, with new purchases allowed only for urgent requirements, such as elections or security purposes. Government-funded foreign travel is prohibited except in urgent or mandatory cases, and delegations to international meetings will be kept minimal. In mandatory international meetings or conferences, delegations led by the Head of State or Government will include no more than 10 members, while other government-funded delegations will be limited to three members.

Officials and employees of public bodies will no longer receive meeting allowances for routine work, although allowances may still be provided for committee meetings established by law, if held outside office hours. Similarly, officials using their own residence—or that of a family member—will not be eligible for a housing allowance.

Prioritization of Development Projects

The ministry stated that ongoing projects with approved resource agreements will continue uninterrupted. Less critical or small-scale projects newly entered into the Line Ministry Budget Information System (LMBIS) will be suspended, including allocations categorized under vague headings like “Miscellaneous.”

Funds from suspended projects may be reallocated to national priority projects, ongoing programs, or social sector initiatives such as education, health, and drinking water. Multi-year resource agreements for newly proposed projects are prohibited this fiscal year, and projects costing more than Rs 1 million must be implemented directly by government authorities rather than through user committees.

Consultancy services should only be procured when internal staff cannot complete a task. Drafting of bills, rules, and guidelines will no longer be outsourced. The government will promote the use of existing furniture, vehicles, and equipment, while auctioning unusable items.

Organizational and Structural Reforms

The Finance Ministry has announced a freeze on new permanent positions, with specialized services handled through temporary consultancy contracts if needed. Duplicate structures across federal, provincial, and local bodies will be eliminated, and certain commissions—including the Land Problem Resolution Commission—will be dissolved.

Key law enforcement and investigative bodies, such as the National Investigation Department and the Department of Money Laundering Investigation, will be restructured under relevant ministries to improve efficiency and international compliance.