Govt tightens spending controls for FY27 budget

The government has imposed fresh restrictions on public expenditure to contain spending and ensure more efficient implementation of the FY2026-27 national budget.

The restrictions include suspending the purchase of new vehicles, overseas training and participation in seminars and workshops funded by the government, and construction of new buildings. The government has also directed ministries and divisions to reduce the number of development projects and increase allocations for priority schemes.

The Finance Division of the Ministry of Finance issued the instructions in a circular recently as part of the process of preparing the revised budget for the current fiscal year.

According to the circular, total expenditure in the revised budget must remain within the ceiling set in the original budget. Ministries and divisions will not be allowed to seek additional allocations. Instead, they have been instructed to reallocate funds within their existing budgetary limits in line with the government's priorities, policies and election manifesto.

The instructions have been circulated to all ministries, divisions and relevant government agencies, asking them to submit their revised budget proposals by November 26.

Strict restrictions on vehicle purchases

Under the new guidelines, allocations for purchasing all types of vehicles will remain unspent during the current fiscal year.

However, government offices may replace vehicles listed under the Table of Organisation and Equipment (TO&E) that are more than 10 years old and purchase essential vehicles for newly established government institutions, subject to approval from the Finance Division.

Except for ambulances and vehicles used for security purposes, all replacement and newly purchased vehicles must be electric vehicles.

The condition may be relaxed for development projects approved before 8 July 2026.

The government has also suspended the construction of new residential, non-residential and other buildings, except for facilities under the education, health and agriculture ministries.

However, expenditure may be allowed to complete buildings that are at least 70% finished, subject to approval from the Finance Division. Separate approval will also be required for the construction of other buildings in cases of urgent necessity.

No allocation can be kept for interest-free special advance loans to government employees for purchasing cars. Similarly, allocations for land acquisition will not be permitted under the operating budget.

Overseas training and travel restricted

The circular also suspends government-funded participation in overseas training programmes, seminars, symposiums and workshops.

However, allocations for foreign travel and training may be considered on a limited scale in cases deemed essential, subject to approval from the appropriate authorities.

Allocations for hospitality, seminars and other events may still be retained, but ministries and divisions have been instructed to avoid extravagance and ensure cost-effective spending.

Less important development projects to be dropped

The Finance Division has directed ministries and divisions to limit the number of projects in the revised Annual Development Programme (ADP) and select schemes aligned with the government's strategic priorities and election manifesto.

Less important projects should be dropped where necessary. No project without an allocation will be allowed in the main section of the revised ADP, according to the circular.

Priority will be given to projects financed by foreign loans and grants, human resource development, agriculture, power generation, agro-based industries, environmental protection, climate change adaptation and disaster management.

Projects scheduled for completion during the current fiscal year will also receive priority.

The government has instructed ministries to reduce allocations for slow-moving projects and divert the funds to important schemes that can be implemented quickly.

Similar small-scale projects may also be grouped into cluster projects instead of being implemented separately.

The circular further emphasises ensuring adequate local currency allocations for projects funded by foreign loans and grants to facilitate the effective utilisation of external resources.

Allocations for new projects may be proposed only after ensuring the necessary local currency funding for ongoing projects.

New pay scale to guide salary allocations

For preparing the revised operating budget, ministries and divisions have been instructed to follow the 2026 national pay structure.

They may use actual salary and allowance expenditure for October of the current fiscal year as a basis for calculating the revised allocations.

The Finance Division has also directed government agencies to consider actual revenue collection and operating expenditure trends during the first six months of the previous two fiscal years and the first four months of the current fiscal year while preparing revised revenue and expenditure estimates.