Nepal unveils Rs 1,279 billion budget for 2017-18

Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara presented the budget for the fiscal year 2017-18 in the Parliament on Monday , which is 22 percent more than that of the current fiscal year.

The budget has earmarked adequate funds for newly formed local bodies,giving resources for provincial and federal elections, major physical infrastructure projects and post-earthquake reconstruction works, it has given continuity to some of the distributive programmes, which could have been avoided. One such instance is the decision to continue extending Rs 5 million to each lawmaker under the Constituency Development Programme and Rs 30 million to every electoral constituency under the Constituency Infrastructure Special Programme, Kathmandu Post reported.

"These programmes should be phased out gradually after local governments become strong enough to cater to the developmental needs," said Swarnim Wagle, a senior economist and member of the National Planning Commission.

The government in the next fiscal year is transferring Rs 225 billion, or 17.6 percent of the total budget, to local bodies, as per the commitment expressed earlier to devolve the responsibility of budget formulation for local bodies from the central to the local level. This policy shift was made after the country formally embraced federal setup in March.

From the next fiscal, each village council will receive a fiscal equalisation grant in the range of Rs 100 million to Rs 390 million, while each municipality will receive a grant ranging from Rs 150 million to Rs 430 million. Each sub-metropolitan city, on the other hand, will receive a minimum grant of Rs 400 million and a maximum of Rs 630 million, while every metropolitan city will receive a grant ranging from Rs 560 million to Rs 1.2 billion.

These allocations were made based on population, development status, cost of service delivery and geographical area, according to Finance Minister Mahara.

In addition to these grants, each local body will be entitled to a conditional grant ranging from Rs 12 million to Rs 783.9 million.

Also, village councils will be allowed to implement projects and programmes of up to Rs 5 million on their own, while such ceiling for municipalities has been fixed at Rs 10 million.

Sub-metropolitan and metropolitan cities, on the other hand, can implement projects and programmes worth up to Rs 20 million on their own.

"These projects and programmes, currently being implemented by the central government, must be handed over to the local bodies within mid-August along with the funds. Concerned ministries should also extend necessary technical support to local bodies to implement these projects and programmes," Mahara said, adding, "These measures will help people feel the difference brought about by federalism."

To further institutionalise federalism, the government is holding provincial and federal elections in the next fiscal year, for which "adequate budget" has been allocated.

All these expenses will bloat the size of the government's recurrent budget--which also covers salary and allowances of civil servants--by 30 percent to Rs 803.5 billion in the next fiscal year.

Despite moderate increment in capital budget, adequate funds have been allocated for national pride projects, such as Upper Tamakoshi and Budhi Gandaki hydroelectric projects; Rani-Jamara-Kuleriya, Bheri Babai and Sikta irrigation projects; Nijgad, Bhairahawa and Pokhara international airports; Kathmandu-Tarai expressway; Postal Highway; and East-West Electric Railway Line.

Also, Rs 62.5 billion has been allocated for the energy sector, Rs 30.5 billion for urban infrastructure and Rs 40 billion for the agricultural sector. Another, Rs 146.2 billion has been allocated for post-earthquake reconstruction works.

"Of the money allocated for reconstruction, over Rs 50 billion was government's own fund," Wagle said. "This will give us more flexibility in programme implementation, as foreign funds usually come with conditions and delay works."

The finance minister has allocated Rs 140.3 billion for financing provision, which includes loans to state-owned enterprises and cost incurred in principal repayment.