Madhesh Budget Faces Estimated 1.2 Billion Rupee Cut, Government Confronts Financial Risks

March 25, Janakpur Dham — The Madhesh government’s budget for the current fiscal year 2082/083 is projected to face a cut of 1.2 billion rupees. This reduction is expected just months after the budget was approved by the assembly and implemented.

The budget of 4.65 billion rupees was originally presented to the assembly on June 15 by then Finance Minister Sunil Kumar Yadav, under the Satish Kumar Singh-led government of Janamat Party.

Of this amount, 1.67 billion rupees (35.89 percent) was allocated for recurrent expenses, and 3.03 billion rupees for capital expenditures. However, it has now become clear that the budget was overestimated by around 1.2 billion rupees.

Overestimating the budget beyond the government’s capacity has exposed it to financial risks. There is a concern that if all planned projects proceed, the government might face difficulties in paying contractors and beneficiaries.

To mitigate these risks, the government has instructed ministries to implement a 20 percent reduction in each project through official correspondence. Moreover, the Finance Ministry has directed ministries to drop fragmented, unjustified, and unfeasible plans.

“The government is currently facing financial risk. Procedures to manage this have already begun. Ministries have been asked to submit plans that are unfeasible, unjustified, or fragmented,” said Finance Minister Mahesh Prasad Yadav of Madhesh.

According to Minister Yadav, although the government’s capacity to manage a budget of 3 billion rupees exists, an estimated 5.5 billion rupees budget had initially been prepared but was later reduced and finalized at 4.7 billion rupees. Ten percent of this is already allocated into various funds. Hence, he said, a budget deficit has arisen.

Despite requests to ministries to submit fragmented, unjustified, and unfeasible plans to streamline the budget, no ministry has complied so far.

“So far, no ministry has submitted any plans. If anyone is willing to present a concrete plan, we will permit it. This is where the risk lies,” Yadav added.

Interestingly, Finance Minister Sunil Kumar Yadav led the Janamat government previously, while the current Congress-led government has appointed Mahesh Prasad Yadav of the Janamat Party to the same position.

Former Finance Minister Sunil Kumar Yadav had explained that the budget was based on grants expected from the federal government and had warned of possible cuts ahead.

“The budget is prepared including grants from the federal government. However, due to movements related to indigenous peoples, Janajati, and livelihood issues, the federal government might cut its budget by 20 percent, which could reduce our overall budget,” he said, emphasizing that even in case of cuts, economic discipline should be maintained positively.

JSPN parliamentary leader and former Chief Minister Saroj Kumar Yadav criticized the deficit budget, saying it would harm the province. “A 1.2 billion deficit budget will damage the province, not benefit it,” he said. “The budget should have been prepared only with the amount available.”

The government led by former JSPN Chief Minister Lal Babu Raut during the past five years never presented such a deficit budget.

How Did the Budget Exceed Capacity?

Last year, the Ministry of Finance predicted a surplus of 1 billion rupees, but only 400 million was realized, showing a shortfall of 600 million. Similarly, projected revenue collection was approximately 950 million rupees, but only 500 million was collected.

Internal borrowing was anticipated at 200 million rupees, but preparations were insufficient. The Nepal government must approve any internal borrowing, which is only available for employment and production-oriented purposes. Direct borrowing was not permitted. These factors contribute to a projected budget reduction of 1.2 billion rupees, according to the Ministry of Finance.

Ministry Secretary Ram Kumar Mahto explained that due to lower than anticipated revenue collection, a reduction in the budget is expected, which is normal.

“Revenue collection targets were not met. The budget is estimated on June 15, but expenses continue through the end of July. This year, spending was high and surplus fell. Previously, a less spent budget would allow surplus replenishment. Therefore, the drop in estimated surplus means a lower budget,” he said.

He added that expected revenue sharing from local governments was insufficient, stating, “Local governments are weak in revenue distribution and have not been able to provide the legally expected revenue to the province. Also, low real estate transactions have left much revenue from gravel and sand uncollected. These factors have hindered effective revenue streams, thus reducing the budget.”

However, despite the budget cuts, the government’s plan to initiate work via consumer committees raises the stakes for even greater financial risk. A lawmaker noted that in a recent ruling coalition meeting, it was proposed to permit plans valued up to 2.5 million rupees for submission in an effort to resolve the budget cut issue. Although discussed, leaders from Congress, JSPN, NCP, and Janamat parties are reportedly trying to push plans under 2.5 million rupees to be executed by consumer committees through forceful means.