Decoding Nepal’s Federal Budget 2022/23

18 Jul 2023

A post budgetary breakdown and analysis

Breakdown of the budget into comprehensible sections. (P.S - subheadings I have used may not align precisely with the government's figures, as I have reorganized them in a manner that I believe enhances coherence.)

Some observations:
The majority of the budget is allocated to cover recurring expenses such as salaries and social security benefits, rather than being directed towards capital expenditures such as building infrastructures. And therefore, pertinent measures need to be introduced to allocate more of the budget towards the latter. Current measures like dismantling twenty duplicate and or redundant institutions, discouraging foreign travel, limiting fuel expenses (which in fact is a step in the right direction but insufficient) only have a total effect of reducing the recurring expense by 15 billion while that effect is more than negated by the increase in social security benefits (an increase of 55 billion).
 
Drastic measures are warranted:
1)   Review of workload and laying off unnecessary staff, as much as 20-30% of civil service workers could and should be easily cut without materially affecting the output through introduction of better management practices.
 
2)   Perhaps the most revolutionary approach could be leveraging the use of Information technology to enhance system efficiency. For instance, just the implementation of automated payment systems in various government interfaces could reduce the need for a significant portion of staff involved in these processes and lead to cost savings through digital governance. Additionally, these digital systems can improve financial transparency and prevent leakages, resulting in further savings that could contribute to an increase in GDP.
 
3)   Massive cuts in defense and civil security workforce, especially in redundant structures like Armed Police Force (APF) , that were useful once upon a civil war time but not necessarily now.
 
4)   Social Security benefits (excluding social security to govt employees) constitute about 15% of the total budget and is actually greater than the money we spend on building infrastructures (roads, bridges, canals, water pipelines, dams and other infrastructures) – That’s way too much than we can afford – need to reduce or at the very least streamline- for instance we can reallocate the distribution of old age allowance (वृद्ध भत्ता) only to people under a certain income, etc.
 
5)   Incentives are powerful - has worked for companies- will work for government bodies too. For instance, the government can establish a yearly GDP growth ranking for local bodies (municipalities, and VDCs) based on their respective areas' GDP growth attaching financial incentives to the mayors for these performances. This approach may foster healthy competition encouraging them to surpass one another and make significant contributions to overall GDP growth.