Banking News – The National Resource Estimation Committee has set the budget ceiling for the upcoming fiscal year 2082/83 at NPR 1.965 trillion, with an estimated internal revenue of only NPR 1.263 trillion. This means that the government will face a budget shortfall of NPR 637.55 billion, which will need to be covered through internal and external borrowing as well as grants.

Public debt as a percentage of GDP continues to rise annually, and a significant portion of government expenditure goes toward debt servicing rather than capital investment. If the government adheres to the committee’s budget ceiling and spending estimates, Nepal could incur an additional NPR 600 billion in debt next fiscal year.

Despite the growing reliance on loans to finance large budgets, internal revenue generation has failed to keep pace. The projected revenue growth for the upcoming fiscal year is only 10.3% higher than the revised estimate for the current year. The government had initially set a target of NPR 1.26 trillion in internal revenue for the current fiscal year but later revised it down to NPR 1.145 trillion.

Dr. Shivaraj Adhikari, Vice-Chairman of the National Planning Commission, emphasized that the revenue growth estimate for the next fiscal year is more realistic than past projections, which often assumed a 20–22% increase. “Based on the mid-term review of the current fiscal year, we have projected a 10% increase in internal revenue for the next year. This is more grounded in reality and follows a methodological approach,” he stated.

To bridge the budget deficit, foreign aid and loans are expected to increase by 28.8% compared to the current fiscal year. The government anticipates receiving NPR 45 billion in foreign grants and NPR 235.9 billion in external loans. However, foreign aid commitments may fluctuate depending on factors such as continued funding from the Millennium Challenge Corporation (MCC).

The government also aims to raise NPR 357.46 billion through domestic borrowing in the next fiscal year, up from the current fiscal year’s target of NPR 330 billion.

Dr. Adhikari noted that while deficit financing is a common global practice, the crucial issue is how the borrowed funds are utilized. “Operating a deficit budget is not inherently problematic; what matters is where and how the borrowed money is spent,” he said. “This year, we have taken a more realistic approach to resource estimation.”

With increasing reliance on debt to finance government spending, experts stress the importance of ensuring that borrowed funds are directed toward productive investments rather than recurrent expenses.