Nepal Budget FY 2078/79 (2021/22): Highlights and Key Takeaways!

Providing a ray of hope amid the pandemic’s devastating second wave, the Nepali Government has rushed to announce the Federal Budget for the Fiscal year 2078/79 (2021/22).

Minister Paudel unveiled the annual budget virtually from Singha Durbar on Saturday as it could not be presented at the House of Representatives, which was dissolved recently.

On May 29, 2021, Finance Minister Bishnu Prasad Paudel has announced NPR 1.647 trillion budget for the upcoming fiscal year 2021/22 that starts in mid-July.

Source: NepalinData

Of the total budget, NPR 678.610 billion has been allocated for recurrent expenditure and NPR 347 billion for capital expenditure.

For the second year in a row, the government has given special focus to controlling the COVID-19 crisis and economic recovery.

“For the government, the priorities are saving lives from the pandemic, recovering the economy damaged in the pandemic, promoting social security, and utilizing public and private resources to boost the productive sector,” mentioned FM Paudel.

Source: NepalinData

The government has increased the Ministry of Health and Population (MoHP) fund by 35% to NPR 122.77 billion. Allocating NPR 26.75 billion for the procurement of COVID-19 vaccines, the government has prioritized vaccine procurement from foreign countries and inoculating people for free.

In the new budget, the Nepali Government has waived all taxes levied on equipment procured by hospitals for installing oxygen plants and purchasing medicines. It also decided to provide a 50% subsidy to the private and public hospitals for installing oxygen plants.

Moreover, the government has also decided to establish a 300-bed hospital in Kathmandu.

Nepal Budget FY 2078/79: Key Highlights and Takeaways

• NPR 14 billion for the Ministry of Labor, Employment and Social Security
• NPR 45.09 billion for the Ministry of Agriculture
• NPR 180.04 billion for the Ministry of Education
• NPR 1.20 billion for women, children, and senior citizens
• NPR 7.60 billion for concessional loans to farmers
• NPR 12 billion to establish chemical fertilizers
• NPR 4 billion to procure health and medical supplies to combat COVID-19 pandemic
• NPR 400 million for skill development training
• NPR 2.5 million for the security of educational security certificate
• NPR 4,000 for senior citizen allowance per month
• 33% rise in all types of social security allowances
• 50% subsidies in farm insurance premium
• NPR 12,000 transport allowance to the health volunteers

Nepal Budget 2021/22: Highlights

Health is wealth

• Embracing the approach that health is everything, Nepal dedicated a significant chunk of the budget to the healthcare sector
• Nepal has earmarked NPR 26.75 billion for COVID-19 vaccines
• NPR 37.53 billion has chalked out for COVID-19 control and treatment
• A monthly allowance of NPR 12,000 will be given to female community health volunteers
• The total budget of the Ministry of Health and Population is a mammoth chunk of NPR 122.77 billion

Strong-arming education

• The lion’s share of the budget went to The Ministry of Education. A total of NPR 180.04 billion has been dedicated to the education ministry.
• The monthly salary of early childhood development teacher is fixed at NPR 15,000

COVID-19 relief

• Taking into consideration the covid-19 impact, the government has doled out waivers
• An income tax waiver of 50% to 90% has been passed in this budgetary plan
• Startups are poised to get a tax waiver for the next 5 years
• A refinancing stimulus of NPR 13 billion will be delivered by the government
• Electricity customers, who consume less than 20 units, stand to get 100% waiver
• 100% waiver for water consumers who consume only 20,000 liters per month
• The film, handicraft, aviation, media, advertising, health club, beauty parlor get license and renewal waiver

Hiked salaries of the Government Servants

• Every government servant stands to receive a salary hike.
• The monthly salary is poised to go up by NPR 2,000 for all the employees’ on the governmental payrolls

Loans

• Up to NPR 2.5 million of a loan at a maximum interest rate of 5% with academic credentials of the level above bachelors as collateral
• Loans Up to Rs 2.5 million, a 1% interest rate for startups, will be doled out to interested startups
• A loan of NPR 80,000 will be given to students to procure laptops

Increased social security allowances

• All social security allowances have received a 33% hike
• Senior citizens stand to get an allowance of NPR 4,000 a month

Infrastructure plans in a nutshell

• Transportation networks are set to be strengthened further
• A total of NPR 15.34 billion is set to be spent on East-West Highway expansion
• NPR 10.03 billion will be expended on Railway development
• The Kathmandu-Terai fast track will be the recipient of NPR 8.15 billion
• The postal highway will be upgraded at the cost of NPR 6.39 billion
• Airports are to be built and renovated with a budget of NPR 20.31 billion
• NPR 43.54 billion has been dedicated to water supply network
• The highway of Madan Bhandari will be revamped at the cost of NPR 3.20 billion

Key projects and announcements

• The central park from Narayanahiti to Tripureshwar in Kathmandu
• A portion of the budget has been earmarked for the construction of temples in the Chitwan region
• Electric vehicles get a boost as road tax get waived for the next 5 years
• Plan to replace fossil fuels vehicles in the next decade
• Personnel’s allowance up by 15% for Nepal Police and Armed Police Force

Cancellation & Reductions

• Local Infrastructure Development Partnership Program, which allowed federal lawmakers to spend budget on the projects they choose and design, was canceled
• The constituency, which previously NPR 60 million per annum, will now get NPR 40 million per year. This is due to the undesired COVID-19 impact.

Key announcements in the Information and Communication Technology  or ICT sector

Sources of Financing

Domestic Borrowing

To meet the spending requirements for the fiscal year 2021/22, the government has borrowed NPR 250 billion from domestic creditors, up by 11.11% from NPR 225 billion in FY 200/21.

Foreign Borrowing

Likewise, the Nepali Government has borrowed NPR 309.29 billion from external lenders, including foreign commercial banks, international financial institutions, and government of foreign countries. The foreign debt for FY 2021/22 is 3.27% more than NPR 299.50 billion in FY 2020/21.

Revenue

The government revenue collection, including government tax, non-tax revenue (property income, administration fees, fines) and capital revenue (sales of assets or stocks), stood at NPR 1024.90 for FY 2021/22, an increase by 15.21% from NPR 889.62 in FY 2020/21.

 Physical Sector

• NPR 33 arba 55 crore allocated for Earthquake Reconstruction
• NPR 41 arba 20 crore allocated for Housing, Building And Urban Infrastructure, up from NPR 37 arba 80 crore in FY 2020/21

Social Security

• NPR 1 arba 20 crore allocated for Women, Children, and Senior Citizens, while it was NPR 1 arba 14 crore in the FY 2020/21
• NPR 43 arba 54 crore allocated for Drinking Water and Sanitation, while it was NPR 43 arba 10 crore in the fiscal year 2020/21

For the FY 2021/22, the Nepali Government has targeted an economic growth rate of 6.5%, hoping that the vaccination drive could aid economic recovery.