Time to curb recurrent spending to boost growth

The government has started discussions on the budget for 2026/27, focusing on downsizing recurrent expenditures that have kept increasing every year. The Ministry of Finance has started consultations with ministries, constitutional bodies, and major spending agencies, especially those that absorb the largest share of regular expenses. The discussions focus on salaries, pensions, allowances, office operations, social security payments, and the minimum funds needed to keep institutions functioning. The stated aim is to trim avoidable administrative costs, use public money better, and discourage routine budget demands that rise every year without improving services or results. This effort comes at a difficult moment. Recurrent expenditure has continued to climb, while revenue growth has failed to keep pace. The result is a shrinking pool of resources for development projects. Although the National Planning Commission sets an expenditure ceiling based on resource estimates, governments have repeatedly gone beyond it. Economists have warned for years that uncontrolled recurrent spending weakens fiscal discipline and pushes development priorities to the margins. To understand why this issue matters so much, one needs to look at the structure of Nepal’s budget. Recurrent expenditure exists for a valid reason.

A state cannot function without paying its employees, running offices, meeting social obligations, and delivering basic services. In that sense, recurrent spending is not waste by definition. It keeps the machinery of government running. Nepal’s challenge is not having recurrent expenditure, but its size and weak link to performance. Salaries and allowances rise year after year, offices expand, new agencies appear, and programs are added with little review. Capital expenditure funds roads, hydropower, irrigation, schools, hospitals, and digital systems. These investments need space in the budget. When most public money is locked into routine expenses, development spending becomes uncertain, delayed, or reduced to symbolic allocations. This helps explain why Nepal struggles to complete projects on time and within cost. Budgets announce ambitious plans, but funds fail to reach projects when they are most needed. Can a country eliminate recurrent expenditure altogether? The answer is clearly no. Every functioning state needs a basic administrative and social spending base. The real problem is the lack of control in spending. Increase in recurrent spending must slow, efficiency must improve, and public money must show results.