MTEF

Nepal’s planning and budgeting process is rooted in constitutional and legal frameworks. Under Article 59(1) of the Constitution, the preparation of the annual budget is defined as the fiscal responsibility of all tiers of government. This responsibility is operationalized through the Financial Procedures and Fiscal Accountability Act, 2076 (2019), and the Intergovernmental Fiscal Arrangement Act, 2074 (2017).

Medium-Term Expenditure Framework (MTEF)

The Medium-Term Expenditure Framework (MTEF) serves as a powerful tool under these legal provisions, institutionalizing fiscal federalism in Nepal.

Key Arrangements

As per Chapter 6 of the Intergovernmental Fiscal Arrangement Act, 2074 (2017), Section 17, all three tiers of government—federal, provincial, and local—are required to develop a mid-term expenditure framework (MTEF) that outlines expenditure plans for the next three years. The framework must include the following details:

1. Objectives of the Proposed Plan:

   • Clearly define the goals and expected benefits of the plan.

2. Justification and Feasibility:

   • Provide a rationale for conducting feasibility studies or allocating expenditures for the proposed plan.

3. Outputs and Outcomes:

   • Detail the anticipated outputs and outcomes for the fiscal year and the subsequent two fiscal years.

4. Expenditure Details:

   • Outline the financial requirements for implementing the proposed plan.

5. Funding Sources:

   • Specify the sources of funding and projections for the outputs and outcomes achievable with the expenditures.

6. Expenditure Strategy:

   • Link the mid-term expenditure strategy with annual expenditure plans.

Local and State-Level Submissions

Local and state-level governments are required to submit projections of income and expenditures for the next fiscal year by the end of Poush. These projections must include:

• Estimated expenditures

• Estimated revenue collection from own sources

• Expected revenue from revenue sharing

• Anticipated grants

• Additional amounts required to meet budget deficits, along with potential funding sources

Provisions under the Financial Procedures and Fiscal Accountability Act, 2076

Further provisions related to the MTEF are outlined in this Act. Key aspects include:

1. Expenditure Projections (Section 6):

   • Each ministry, in coordination with the planning commission, must project expenditures for the next three years.

   • Programs should be prioritized based on feasibility studies.

2. Fiscal Resource Appraisal (Section 7):

   • The planning commission and Ministry of Finance assess fiscal resources.

   • The National Funds Estimate Committee, under the planning commission, estimates fiscal resources and monitors fiscal indicators.

3. Budget Ceilings:

   • Budget ceilings are determined based on anticipated revenue, grants, and loans.

4. Budget Preparation:

   • The Ministry of Finance, following budget discussions, estimates revenues and allocates resources for the next fiscal year.

   • A budget proposition is then presented, ensuring alignment with fiscal priorities.

Conclusion

Nepal’s planning and budgeting framework, underpinned by constitutional and legislative provisions, emphasizes transparency, fiscal discipline, and long-term planning. The MTEF ensures that expenditure strategies are aligned with development goals, fostering effective fiscal federalism and sustainable economic growth.