Nepal's Fiscal Health: Expert Recommendations for Drastic Government Spending Cuts

The role of income and expenditure is paramount in running any country's government. If the ratio of income to expenditure is balanced, that country's economic health is robust. To achieve this, one must either increase income or adopt frugality in spending. The government resorts to public debt to cover unforeseen expenses, complete large and productive development projects, or manage short-term funds. Otherwise, the nation's economic health deteriorates, resulting in the country becoming poorer and its people suffering.

Nations with weak economies are often looked down upon, pushed around, encroached upon, and unnecessarily troubled by others. This is currently the situation for Nepal and Nepalis. Examples include the country being placed on the 'Grey List,' passports losing recognition during international travel, enduring undeclared blockades, and having to pay unnecessary fees.

Unless the new government can generate a flood of revenue from the tourism sector, it does not appear capable of immediately increasing income. Previous governments took excessive loans to manage short-term needs, drowning the populace in debt. There are limits to how much public debt an economy can bear. The Office of the Auditor General reported that public debt, which was 27.7 percent of GDP four years ago in 2078 BS, has increased to 41 percent by mid-2082 BS. The only remaining option is to cut expenditures. Any necessary spending cuts must be done in a way that does not immediately affect the operation of general administration or the public.

Hundreds of commissions may have been formed by previous governments, submitting reports and issuing warnings. The new government does not need to establish new commissions to balance income and expenditure; it is sufficient to implement those existing reports according to its suitability and the current time. From the perspective of the common citizen, the government can cut spending across hundreds of headings.

In this context, this article presents suggestions for expenditure cuts under the following representative headings:

• Expenditure Cuts from Parliament

It is widely felt that the federal parliament is a burden for a country with a small population. Many commission reports suggest that 130 members of parliament in total—100 in the House of Representatives and 30 in the National Assembly—would suffice. Currently, there are 334 members. This number can be reduced through a constitutional amendment to lower costs. Furthermore, while the current facilities provided to MPs might not seem excessive compared to wealthy nations, adjustments can be made to allowances and other facilities relative to Nepal's economic status and income level.

• Provincial Expenditure Cuts

Provincial structures were established based on the foundations of the Maoist and Madhes movements at the time. Political parties have been using these structures as centers for cadre recruitment and training. For such a small area and population, there is scope to consider how to reduce the expenses related to 7 parliaments, 7 governments, 7 provincial chiefs, and their staff, advisors, rent, vehicles, fuel, and maintenance, in addition to the central parliament and government. This would save the country from a significant financial burden.

• Form of Government

Considering the geographical size, population, and the level and type of service delivery, the administrative structure of the Government of Nepal is large and cumbersome. Such suggestions are also coming from experts. Instead of implementing those suggestions, the government seems to be increasing the number of central ministries, secretariats, or departments. There are reports suggesting that the number of central ministries could be limited to 12–15, the number of centrally directed districts to 50, and local bodies reduced to around 500. Therefore, government offices that serve little purpose, such as the Revenue Investigation Department, National Investigation Department, Special Police Department, and Samarajang Company, should be abolished or merged.

• By-elections

Current law mandates by-elections to fill vacancies in any level of elected representative if the vacancy remains for at least 6 months or more. Holding a by-election for a term of only six months means the representative has little time to work before the term ends, and conducting by-elections for short periods only incurs government expenditure. Therefore, frugality can be achieved by amending the provision to hold by-elections only for terms of at least one and a half years or more.

• Facilities Provided to Leaders

Furthermore, there are numerous instances where leaders have pressured the administration to secure additional facilities. Cutting such facilities and recovering assets illegally acquired by them would immediately reduce state expenditure. The same applies to high-ranking officials and employees, which can also be reconsidered. Additionally, the state sends some leaders and high-ranking individuals abroad for medical treatment at its own expense. When the state is weak, the government can cut such expenses. Expenses like donations and medical treatment costs provided by the Ministry of Home Affairs fall into this category, which the government can reconsider.

• Abolishing the Orderly System in Army and Police

The orderly system for officers and junior officers in the army and police has existed since the past. They have primarily been used as domestic help. The orderly system, which employs personnel at the expense of the state treasury to work in homes, must be abolished. This alone can save a significant amount of state funds.

• Holding Contractors Accountable

Most contractors take on various contracts but instead of completing the work on time, they prolong it to get the contract amount increased by the state. Therefore, if contractors can be made accountable to the state, a large amount of state funds can be saved, and development work will also be completed on schedule.

• Social Security and Double Benefits

Currently, a large amount of state money is being spent on social security. Additionally, many people are receiving double or triple allowances. Therefore, the incoming government must seriously consider this for expenditure control.

In reality, the government's income (excluding any grants received) is generated from taxes collected from the people and institutions within the country. The government spends from this income. All such income and expenditure must be done with the approval of the parliament and in accordance with the law.

However, in Nepal, past governments continuously increased unproductive spending in the name of public welfare, delivering misgovernance in the name of good governance. This has resulted in the country and its people becoming poorer. Keeping all these factors in mind, the incoming government should make government spending frugal and systematic, and reduce wasteful expenditure.