KATHMANDU, Feb 9: The Ministry of Finance (MoF) has begun preparations for the annual budget of fiscal year (FY) 2026/27, with a focus on containing recurrent expenditure.
Senior officials said the MoF on Sunday initiated consultations with government ministries, constitutional bodies and other key stakeholders to discuss resource allocation and spending priorities for the next fiscal year. The first round of discussions focused on ministries and agencies that account for a large share of recurrent expenditure.
“In the initial phase, we have started discussions with ministries and constitutional bodies that receive a major portion of recurrent spending,” a senior MoF official said.
Finance ministry plans to reduce govt's recurrent expenditure
The government aims to limit administrative expenses while improving the efficiency and productivity of economic units. Accordingly, the discussions centered on regular programmes, mandatory financial liabilities and the minimum budget required to keep government agencies operational in FY 2026/27.
Recurrent expenditure—largely driven by civil servants’ salaries, allowances, office operations and social security payments—has continued to rise in recent years. With revenue growth remaining weak, the expanding recurrent burden has constrained the government’s ability to mobilise resources for development and capital expenditure.
MoF officials said the consultations are intended to assess realistic funding needs of ministries and government bodies, and to discourage budget proposals that inflate recurrent costs without corresponding gains in service delivery or economic output.
Based on the discussions and the government’s stated priorities, the National Planning Commission (NPC) will set the budget ceiling for the next fiscal year. The ceiling is determined by the National Resource Estimates Committee (NREC) under the NPC to ensure alignment between the annual budget and the country’s periodic development plans, while safeguarding fiscal discipline and macroeconomic stability.
As mandated by the Constitution, the government must present its detailed annual budget for FY 2026/27 on Jestha 15 (May 29). By law, the NREC is required to fix the budget ceiling by mid-February, and the government is expected to frame its budget within that limit.
However, this provision has not always been strictly observed. In the current fiscal year, the NPC had set an expenditure ceiling of Rs 1.900 trillion based on initial resource estimates, but the government unveiled a budget of Rs 1.964 trillion, exceeding the prescribed limit.
Economists have repeatedly warned that unchecked growth in recurrent expenditure could undermine fiscal sustainability and crowd out investment in infrastructure, health, education and other development priorities. The government’s emphasis on restraining recurrent spending in the upcoming budget is seen as an attempt to address these concerns, though its effectiveness will depend on implementation.
