Nepal Federal Budget 2020/21: Highlights and Key Announcements

Amid the criticism for not meeting the goals and targets of the previous budgets, Nepal’s new budget envisions many ambitious programs while repeating some unimplemented programs from past years.

The Nepali government has announced its Federal Budget for FY 2020/21 (2077/78) on May 28, 2020.

Finance Minister Dr. Yubaraj Khatiwada presented an NPR 1.474 trillion budget for the new fiscal, down from NPR 1.53 trillion for FY 2019/20.

Out of the total budget for the next fiscal, the Nepali Government has allocated NPR 352.91 billion (23.9%) for capital expenditure, NPR 948.94 billion (64.4%) for the recurrent expenditure and NPR 172.79 billion (11.7%) for the financial management.

The government has set a revenue collection target of NPR 889.62 billion to finance the expenditure. It has targeted to collect NPR 60.52 billion in foreign grants, NPR 299.5 billion from external debt and NPR 225 billion from domestic borrowing.

[JUST IN: Nepal Income Tax slab tax rates for Financial Year 2077-78 (2020-21)]

The new budget seems quite different from the previous two as it has to deal with the ongoing economic crisis that has hit revenue and the nation’s two primary sources of income, foreign remittances and tourism.

As the coronavirus pandemic has hard hit the country, the government has allocated a significant amount to the health sector and other major industries that help rejuvenate the economy.

Many had high expectations that the new budget would be a dramatic departure from the past and make bold decisions to confront the ongoing crisis.

However, the new budget has same elements from previous programs and does not signify a bold move to address economic challenges in the wake of COVID-19.

Moreover, the government has set an economic growth target at 7% despite the estimates from the Central Statistics Department that COVID-19 would restrict the nation’s economic growth to 2.3% in the current fiscal.

However, there are some crucial developments in the new budget plan 2020/21 (2077/78).

1) Prioritizing Health Sector

The government has given priority to the healthcare sector in the new budget to improve the healthcare system and address Covid-19 and similar crises in the future.

The new health budget stands at NPR 90.69 billion, up by NPR 20 billion against NPR 68.78 billion of current fiscal.

• NPR 6 billion – Control of coronavirus infection
• NPR 500,000 – Free health insurance for doctors and health workers
• NPR 12.66 billion – Health sector infrastructure
• NPR 5.10 billion – ‘One Doctor, One Health Institution Program’
• NPR 14.72 billion – Construction of 272 more health institutions at the local level
• NPR 4.22 billion – Treatment of diseases such as tuberculosis and sexually transmitted diseases

2) Energy, Irrigation and Water Supply Projects

In the budget statement, the government has emphasized the development of new energy, irrigation and water supply projects, and the completion of under-construction projects.

In total, the government has allocated NPR 83.49 billion for energy, irrigation and water projects.

• Budhi Gandaki Hydroelectric Project – NPR 13.57 billion
• Water Supply and Sanitation Project – NPR 43.46 billion
• Rani Jamara, Babai and Bheri Babai Irrigation Projects – NPR 23.63 billion
• Sunkoshi-Marin Diversion Multipurpose Project – NPR 2.5 billion

3) Road, Rail and Water Transport Infrastructure

The Nepali government has significantly increased the budget for the transportation infrastructure to NPR 163.52 for the next fiscal from NPR 109 billion in 2019/20.

• East-West Highway Upgradation – NPR 19.18 billion
• Mid-hill highway – NPR 12.20 billion
• Postal Highway – NPR 13.63 billion
• Kathmandu-Tarai Fast Track – NPR 15.1 billion
• Construction of 200 Bridges – NPR 7 billion
• Koteshwor-Kalanki Stretch – NPR 1.81 billion

Meanwhile, the government has allocated NPR 7.70 billion to develop the East-West and North-South rail networks, mono and metro rail systems.

4) Budget for Provincial and Local Governments

The Nepali Government has reduced the Provincial Government’s budget for the next FY 2020/21, as it significantly decreased ‘conditional grants’ while failing to increase ‘equalization grant.’

• Fiscal Equalization Grant – NPR 145.25 billion
• Conditional Grant – NPR 168.42 billion
• Revenue Sharing – NPR 130.89 billion
• Complementary Grant – NPR 10 billion
• Special Grant – NPR 10 billion

5) Education Sector

The Nepali Government has allocated NPR 171.71 billion to the Ministry of Education, Science and Technology for the next fiscal, an increase by NPR 7.96 billion from last fiscal’s NPR 165.76 billion allocation.

• Education sector – NPR 17.43 billion
• Scholarships to 2.6 million students – NPR 2.70 billion
• Sanitary pads to 1.34 million female students – NPR 1.82 billion
• School Meal Program – NPR 7.92 billion
• Prime Minister Employment Program – NPR 11.60 billion
• President Education Sector Improvement – NPR 6 billion
• Free books and stationery – NPR 2.76 billion
• University Donation Forum – NPR 17.43 billion
• 6,000 volunteer teachers – NPR 2.23 billion
• Infrastructures development and education initiation in Madan Bhadari Science and Technology Institute – NPR 1 billion

Programs include:

• Providing free education for secondary level students
• Announcing Literate Nepal mission
• Implementing virtual education, online education and television education

6) International Airports

The Nepali Government has prioritized the construction of quality air infrastructures for safe, regular and credible air services in the upcoming FY 2020/21.

The government has allocated NPR 19.42 billion for the construction and upgradation of international airports in the country.

The amount will be used for-

• Completing the construction of Gautam Buddha International Airport (GBIA)
• Upgrading Tribhuvan International Airport (TIA)
• Completing the construction of Pokhara Regional International Airport

7) Construction of Suspension Bridges

The Nepali Government has planned to replace the improvised cable crossings with suspension bridges across the country.

The government has allocated NPR 5.02 billion for the construction of at least 2,200 suspension bridges.

8) Promoting Agriculture Sector

Unveiling the budget for FY 2020/21, the Nepali Government has allocated NPR 68 billion to implement various farmer-focused programs.

The programs include-

• Installation of weather radars at two locations
• Establishment of land banks at 300 locations
• Promotion of cooperative farming
• Set up one standard food testing lab each in Karnali and Gandaki Province
• Establishment of a well-equipped animal quarantine lab at all main customs points
• Set up 78 wholesale agriculture markets in all states
• Expand irrigation facilities in additional 22,000 hectares of land
• Establishing 5,000 small and medium irrigation systems in 25 districts
• Production of more than 5 million units of fruit saplings in the next fiscal

The budget allocation includes-

• Promotion of Agricultural Products – NPR 41 billion
• Irrigation – NPR 27 billion
• Promotion of ‘One Local Unit, One Pocket Product’ – NPR 3.22 billion
• Promotion of Sugarcane Production – NPR 950 million

9) Sports Sector

Through the FY 2020/21 budget, the Nepali Government has allocated 1.63 billion for the development of the sports sector. However, the new budget is less than the previous year’s budget allocation of NPR 3.99 billion.

Let’s hope that the new budget 2020-21 (2077-78) will help the Nepali Government to combat the economic disruption caused by the COVID-19 pandemic and prepare for uncertain future ahead.

10) Promoting Green Energy

The government has allocated NPR 4.13 billion to promote green energy sources such as hydropower, solar energy and production of electricity from organic waste.

Moreover, Nepal is set to add 1,300 MW of electricity to the national grid in the coming fiscal year.

11) Supporting Tourism and SMEs

The government has allocated NPR 50 billion to support the tourism industry and small and medium enterprises (SMEs) affected by COVID-19.

Nepal has allocated NPR 2.68 billion amount for the development and promotion of tourism infrastructure to attract tourists.

Moreover, the tourism industry will also get an income tax rebate of up to 20% and loans will be interest-free for this fiscal.

12) Boosting Infrastructure Projects

The Nepali Government has allocated NPR 138 billion for various infrastructure development projects.

• NPR 8.93 Billion – Kathmandu-Tarai Fast Track
• NPR 19.42 Billion – International airport construction and preparation in Pokhara, Bhairahawa and Nijgadh, and upgrading of Kathmandu airport
• NPR 6.42 Billion – Tunnel road projects
• NPR 5.4 Billion – Melamchi water supply project

13) Labor and Employment

Through the FY 2020/21 Budget, the Nepali Government has given priority to implementing various programs to provide labor and employment opportunities in the country.

The government has allocated NPR 1 billion for providing employment for 1 lakh people from sectors affected by COVID-19.

The programs include-

• Promoting “Building Our Village on Our Own” program
• Loan Interest rate for startups for BFIs – 2%
• Creating 150,000 job opportunities in the agricultural sector

14) Social Security

The government has allocated NPR 67.50 billion for social security. Various programs under social security include-

• Providing social security allowances
• Providing insurance to 3 lakhs senior citizens
• Making infrastructures disable friendly
• Providing free equipment for blind people

15) Financial Sectors

Unveiling the Federal Budget for FY 2020/21, the Nepali Government has emphasized on supporting and developing financial institutions in the country.

The government has allocated NPR 13.96 billion for interest, loan and insurance subsidy.

The programs include:

• Encouraging Banking and Finance Institutes (BFIs) to implement mergers and acquisitions
• Embracing BFIs to uplift industries affected by the pandemic
• Promoting digitization and cashless economy
• Broader interest rate brackets up to 5% to special convenience loans
• Promoting mobile and internet banking in remote areas
• Strengthening microfinance operation
• Extension in insurance for industries and public transportation affected by COVID-19
• Promoting debenture
• Implementation of national payment gateway
• Digitizing NEPSE
• Implementing convenient E-payment for all kinds of utilities

Source: NepalInData

Watch Live Nepal Budget Speech 2020/21 (2077/78)

Budget Statement for the Fiscal Year 2077/78

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Background

Amid the growing expectations from public and industrial sectors for financial relief, the Nepali Government is all set to unveil the much-awaited Federal Budget for FY 2020/21 (2077/78) on May 28, 2020.

Finance Minister Dr. Yuba Raj Khatiwada is scheduled to present the government’s revenue and expenditure estimates for the new fiscal at the Federal Parliament at 4 PM today.

Earlier, the Nepali Government has presented an NPR 1.53 trillion budget for FY 2019/20, up from NPR 1.315 trillion for FY 2018-19. It has aimed at achieving economic growth of 8.5 percent in FY 2019/20.

However, the coronavirus pandemic has had an enormous impact on fiscal revenue growth, scattering the nation’s economic goals.

Even though the economic growth is as estimated until mid-March, the COVID-19 lockdown had severely affected the economy, bringing down the expected economic growth to 2.3% for the current FY 2019-20.

So, the government will undeniably encounter several economic issues to be addressed in the upcoming fiscal.

The upcoming budget is expected to stabilize the nation’s economy and its shaky job market and support small and medium-sized businesses that have taken a battering from the contagion.

Economic Challenges in Plate for FY 2020/21 Budget

• Assistance for individuals who lost employment
• Support to the hard-hit private sector
• Covering financial liabilities like salaries of government employees, pension and fiscal transfers to the local governments
• Financial relief for the needy
• Restarting halted projects
• Introducing new projects and programs
• Improving the public healthcare system

Moreover, Nepal cannot rely on foreign grants at this moment as most of the countries are themselves reeling under economic crises.

Despite the pressures on finances, the Nepali Government is preparing to increase the budget size compared to the total estimated expenditure for the current FY.

Stay Tuned to Nepali Sansar for Live Updates on Nepal Federal Budget 2020/21 (2077-78)!