The government’s resource committee has held its first meeting this year, formally kicking off the process of framing the budget for the next fiscal year.

The resource committee is led by the vice chairperson of the National Planning Commission and comprises finance secretary and central bank governor as members. It fixes annual budget ceiling for the government and directs the Ministry of Finance to prepare the annual expenditure plan based on this cap.

During the meeting held on Friday, discussions were basically held on sources from where funds could be mobilised to cover expenses of the next fiscal year, a high-ranking government official said on condition of anonymity. “We will finalise the estimate on sources of funds during the next meeting,” the official said.

Some of the major sources of funds for the government are tax and non-tax revenue, domestic and foreign debt, and foreign grants. In the current fiscal year, tax and non-tax revenue is expected to make a contribution of 57.1 percent to the government’s spending, followed by foreign loan (16.7 percent), domestic loan (11.3 percent) and foreign grant (5.6 percent).

Although tax and non-tax revenue makes biggest contribution to government’s spending and will continue to do so in the future, its share is likely to fall in the next fiscal year due to legal provision on revenue sharing with provinces and local bodies.

The Intergovernmental Fiscal Management Act has made it mandatory for the central government to share 15 of the revenue generated from value added tax (VAT) with local bodies and another 15 percent with provinces. Also, 15 percent of excise duties generated from sales of domestic products must be distributed among local bodies and another 15 percent among states.

On top of this, the central government must provide 25 percent of the royalty generated from use of natural resources to local bodies and another 25 percent to provinces.

“This will prevent the central government from introducing a big budget in the next fiscal year,” the official said.

Earlier, Finance Secretary Shankar Prasad Adhikari had said the central government may introduce a budget of around Rs1,600 billion for the fiscal year 2018-19. But there are now doubts whether the country can afford a budget that is 25 percent bigger than that of the current fiscal year.

The government has introduced a budget of Rs1,279 billion for the current fiscal year. Of this amount, Rs803.5 billion has been allocated for recurrent spending, Rs335.2 billion for capital spending and Rs140.3 billion for financing provision.

“The budget of the next fiscal year will be bigger than that of the current year. But we are yet to determine the size because many projects and programmes have been transferred to lower tiers of government,” said the official.

“However, most of the local bodies and provinces will rely on central government’s funds to implement projects and programmes transferred to them, so the central government’s budget may still be big.”