KATHMANDU, May 29: The government is all set to announce its expenditure plan of around Rs 1.9 trillion for the next fiscal year on Thursday amid increasing challenges to manage revenue sources.
In recent years, there has been a notable decline in foreign grants while the government has been unable to utilize foreign loans to the maximum capacity. Likewise, the revenue collection is also not as expected. As a result, the government is relying more on domestic borrowings to manage its immediate liabilities.
With only one and a half months left for the completion of the current fiscal year, the government has achieved only 67.79 percent of its annual revenue collection target. Likewise, the government has also failed to meet its target to receive foreign grants from donor agencies.
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Although the government had set a target to mobilise more than Rs 52.32 billion in grants in the current fiscal year (FY 2024/25), it has received only Rs 16.61 billion (31.74 percent) as of Tuesday. In the FY 2023/24, the government received grants of only Rs 2.75 billion out of the targeted amount of Rs 49.94 billion. Due to the revised policies of the USA and European Union, the grant amount is likely to decline significantly in the next FY.
The government expects to finance its expenditure plan of Rs 1.86 trillion announced for the current fiscal year through Rs 1.28 trillion in tax revenue, Rs 330 billion in internal loans, Rs 217 billion in external loans, and Rs 52.3 billion in foreign grants.
According to the records with the Public Debt Management Office, the government mobilized foreign loans of only Rs 89.68 billion out of the targeted amount of Rs 217 billion in the first 11 months. On the other hand, the government collected domestic borrowings of Rs 301.14 billion against the target of Rs 330 billion.
An official of the Ministry of Finance (MoF) acknowledged the increasing reliance of the government on domestic loans as its key financial source. “At present, the government has mandatory liability of more than Rs 1.5 trillion. Even complying with the budget ceiling of Rs 1.9 trillion for this year, the government will have fiscal space of only around Rs 350 billion, which will be managed only through loans taken from the domestic sectors,” said the source.
According to economists, excess reliance on domestic loans will reduce spending capacity of the private sector while it also exerts pressure on interest rates hike. “Increased domestic borrowings could hit the private sector's initiative to inject their capital,” said Economist Keshab Acharya.
