How Nepal's Budget Is Made: Process, Calendar and the Red Book Explained

Nepal's federal budget rests on Part 10 of the Constitution of Nepal (2015), titled Federal Financial Procedures. Article 115 establishes that no tax may be levied or loan raised except in accordance with law, Articles 116 to 118 govern the Federal Consolidated Fund and what is charged on it, and Articles 119 to 125 lay out the budget, appropriation, supplementary estimates, votes on account, votes of credit and the contingency fund.

Article 119 requires the Minister for Finance to lay before a joint sitting of both Houses of the Federal Parliament an annual estimate covering an estimate of revenues, the money required to meet charges on the Federal Consolidated Fund, and the money to be provided for by a Federal Appropriation Act. Crucially, Article 119(3) fixes the presentation date: the estimate of revenues and expenditure must be laid before Parliament on the 15th day of Jestha (mid-May) each year.

This fixed date was a deliberate reform written into the 2015 Constitution. Before it, the budget was frequently presented late, which delayed approval and squeezed the time available to actually implement development projects. Anchoring the budget to 15 Jestha gives Parliament and spending agencies roughly two months to approve and prepare before the fiscal year begins on 1 Shrawan (around mid-July).

Before any spending plan is drawn up, the government must decide how much money there is to spend. This is the job of the National Resource Estimate Committee (the Resource Committee), chaired by the Vice-Chairperson of the National Planning Commission (NPC) and including senior officials such as the Finance Secretary and the Governor of Nepal Rastra Bank. The committee estimates the resources available to the federal, provincial and local governments and sets expenditure ceilings for the coming three fiscal years.

These ceilings feed into the Medium-Term Expenditure Framework (MTEF), a rolling three-year budgeting tool led by the NPC in collaboration with the Ministry of Finance. The MTEF links annual budgets to medium-term policy priorities, helps drop poorly performing projects and keeps spending within realistic resource limits. It is a mandatory annual document at the federal, provincial and local levels and is presented alongside the budget.

Within the approved limits, the NPC issues budget ceilings and the MTEF framework to line ministries and agencies, which then prepare their detailed programmes and estimates within those caps. Much of this is processed electronically through the Line Ministry Budget Information System (LMBIS).

Although timing can shift, the cycle follows a recognisable sequence keyed to the Nepali calendar. The process effectively begins months before presentation, with the Ministry of Finance issuing a budget calendar and formation of a drafting committee.

The Resource Committee under the NPC settles the resource estimate and expenditure ceilings, and the NPC disseminates ceilings and the MTEF to ministries, around the middle of Magh (early-to-mid February). Line ministries then submit their plans, programmes and detailed estimates within their ceilings, after which the Ministry of Finance consolidates, negotiates and finalises the national budget. The Finance Minister presents it on 15 Jestha, and Parliament debates and approves it before the new fiscal year starts in mid-July.

On budget day the government does not table a single document but a package. The most visible is the budget speech (बजेट वक्तव्य), the policy statement read out by the Finance Minister that summarises the economic situation, priorities, headline allocations and major programmes. Alongside it come the legal and detailed financial documents.

The Red Book, or Rato Kitab (रातो किताब), is the detailed estimate of expenditure: the line-by-line breakdown of how money is allocated to each ministry, agency and programme, organised under budget heads and economic classifications. It is the working financial blueprint that translates the speech into specific numbers. The Finance Bill carries the government's tax proposals, while the Appropriation Bill is the legal instrument that authorises spending from the Federal Consolidated Fund under specified heads (Article 120). Two further money bills are typically presented: a national debt (public debt raising) bill and a loan and guarantee bill, which authorise government borrowing and guarantees.

These documents are published by the Ministry of Finance. Once enacted, the Finance Bill becomes the Finance Act, generally valid for a single fiscal year; certain schedule provisions can take effect immediately on budget day, while the Act becomes fully effective after passage by both Houses, authentication and publication in the Nepal Gazette.

Understanding the budget means understanding a handful of recurring terms used in the Red Book and the speech. Nepal classifies spending using a chart of accounts based mainly on the IMF Government Finance Statistics Manual 2014 (GFSM 2014) and the Classification of the Functions of Government (COFOG).

Sometimes spending authority is needed before the full budget is law, or the approved budget proves insufficient. The Constitution provides for both situations. Under Article 122 (votes on account), a portion of the estimated expenditure may be spent in advance while the Appropriation Bill is still under consideration. The sum involved in a vote on account cannot exceed one-third of the estimated expenditure for the financial year, a vote-on-account bill cannot be introduced before the revenue and expenditure estimates have been presented, and any advance spending must be incorporated into the final Appropriation Bill.

Under Article 121 (supplementary estimates), the Finance Minister may table additional estimates during the year in three situations: when the sum authorised for a service is insufficient, when a need arises for expenditure on a new service not provided for in the Appropriation Act, or when expenditure has exceeded the amount authorised. Such sums are specified under the relevant heads in a Supplementary Appropriation Bill, this is the mechanism behind a mid-year supplementary budget.

When Parliament is not in session, the budget process can become contested. In 2021 the outgoing government introduced the budget through an ordinance after the House of Representatives was dissolved; the Supreme Court observed that bringing a full budget by ordinance days before the constitutional presentation date was inappropriate, and after the House was reinstated the budget-related ordinances were brought back before the joint sitting of Parliament. The episode underscored that the normal, constitutionally preferred route is presentation to, and approval by, a sitting Federal Parliament.