Government Faces Severe Budgeting Crisis Ahead of FY 2082/83: Thousands of Projects Likely to Be Axed

As the countdown to Nepal's federal budget announcement for the fiscal year 2082/83 nears its final 7 days, the government finds itself grappling with a perfect storm of fiscal pressure, project overload, and systemic inefficiencies. With the National Resource Estimate Committee capping the spending limit at around NPR 1.9 trillion, the government is facing an uphill battle to fund even its prioritized development projects.

Revenue Crisis & Mounting Debt

The revenue collection remains sluggish and well below expectation, a lingering aftereffect of the COVID-19 pandemic that has weakened Nepal's economic base. According to Vice-Chairman of the National Planning Commission (NPC), Dr. Shivaraj Adhikari, the government's ability to raise resources has reached a near-breaking point. He cited the chronic nature of the problems—declining foreign aid, ineffective revenue mobilization, and growing public debt—as key barriers to sound fiscal planning.

The ongoing fiscal year’s debt obligations, combined with salaries, social security, and interest payments, have consumed a significant chunk of the budget, leaving little room for capital expenditure.

Massive Project Cull Expected

In a landmark move to restore budget discipline, the NPC has initiated a brutal pruning of the national project pipeline. Of the 18,100+ projects currently registered in the National Project Bank (NPB), only around 7,000 are expected to survive into the next fiscal year. The rest—roughly 11,000 projects—are slated for elimination.

This aggressive downsizing reflects a shift in government strategy. Projects must now meet revised criteria: clear cost estimates, set implementation timelines, and completed preparatory work. Furthermore, projects with a cost of less than NPR 30 million will no longer qualify for registration. Any project that remains unimplemented for five years will be automatically deactivated.

Why So Many Projects?

Over the years, a trend of indiscriminately listing projects in the NPB—often just to secure annual budget allocations—has proliferated. Ministries have been found inserting projects with no feasibility, coordination, or long-term value just to claim funds. This has created a bloated budget and delayed key infrastructure development.

In FY 2080/81 alone, 11,014 projects were registered—nearly double that of the previous year. Ministries like Urban Development (7,377 projects), Physical Infrastructure and Transport (5,294), and Water Supply (2,859) were the biggest contributors to this project overload.

Political Pressure: The Return of MP Development Fund?

Adding further strain to the budgeting process is renewed political pressure to reinstate the controversial "MP Development Fund"—a discretionary pool that allows Members of Parliament to direct funds to projects in their constituencies. The Finance Committee of the House of Representatives has subtly recommended reviving the fund under the guise of giving MPs power to select development programs.

Critics argue that such funds lead to fragmented, vote-buying oriented spending that undermines national development goals. Dr. Jagadish Chandra Pokharel, a former Vice-Chair of the NPC, warned that without strong criteria and oversight, the fund could become another avenue for political favoritism and fiscal waste.

Calls for Transformative Projects and Regional Balance

Experts at the NPC have called for the government to prioritize transformative infrastructure projects—like the Mid-Hill Highway and Gandaki Triangle Project—over fragmented, small-scale ones. Dr. Pokharel also noted the growing trend of internal migration from the hills to the plains, suggesting that infrastructure planning must reflect new demographic realities.

Other former NPC leaders, including Dr. Dipendra Bahadur Kshetri and Dr. Govind Raj Pokharel, criticized the system for allowing unprepared projects to enter the national budget under political pressure. Kshetri even alleged that provincial budgets are being manipulated for commissions, with project inclusion in the “Red Book” (the government's official budget document) being treated as a guaranteed payout.

Dr. Prithvi Raj Ligal emphasized prioritizing education reform and skilled manpower generation, which are often sidelined in favor of visible but less impactful infrastructure spending.

Structural Issues & Governance Breakdown

The most troubling takeaway from this year's budget preparation process is the extent of institutional dysfunction. NPC Vice-Chair Pushpa Raj Kandel stated that coordination between the Ministry of Finance and the NPC is virtually absent, and inter-agency cooperation has collapsed.

Revenue leakages due to smuggling, porous borders, and a weak private sector performance have further compounded the problem. Kandel suggested that the real crisis is one of governance, not just funding.

Dr. Govind Raj Pokharel even touched on corruption as a key bottleneck, especially in user committee-led infrastructure projects where transparency is notoriously poor. He advocated for “resource mapping” in key sectors like cement, hydropower, and mining to better direct investment.

This year's budget isn’t just a matter of balancing numbers—it’s a mirror reflecting the rot in Nepal’s fiscal governance. Years of unchecked political influence, bureaucratic inefficiency, and ad hoc planning have finally pushed the system to its breaking point. The aggressive cut in projects and push for tighter criteria suggest the government is attempting to pivot toward accountability and realism.

But without depoliticizing the budgeting process and restoring the Planning Commission’s authority, these reforms may fall flat. The looming reintroduction of the MP fund, if mishandled, could undo much of the intended discipline. If the government genuinely seeks a transformative, execution-focused budget, it must resist populist impulses and instead prioritize feasibility, impact, and national coherence.

In short, Nepal’s budget crisis is a governance crisis—one that demands more than a red pen. It demands a reset.