Govt suspends vehicle purchases, foreign travel in FY27 austerity drive

The government has imposed sweeping austerity measures for the 2026-27 fiscal year, suspending the purchase of vehicles, restricting foreign travel at public expense and halting spending on new building construction to ensure prudent use of public funds and maintain macroeconomic stability.

The Finance Division issued a circular on Wednesday outlining the expenditure controls, which will apply to all ministries, divisions, autonomous bodies, corporations and state-owned enterprises.

Under the new directives, no funds from either the operating or development budgets may be used to purchase motor vehicles, watercraft or aircraft during FY27. The Finance Division has also suspended the interest-free special loan facility previously provided to government employees for purchasing vehicles.

However, government agencies will be allowed to replace vehicles that are more than 10 years old. Newly established government institutions may also procure vehicles with prior approval from the Finance Division.

The circular also stipulates that, except for ambulances and security vehicles, all replacement or newly purchased jeeps and cars must be fully electric vehicles (FEVs).

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As part of the austerity measures, all foreign travel funded by the government for training programmes, seminars, symposiums and workshops has been suspended.

Exceptions will be allowed for master’s and PhD programmes pursued under scholarships or fellowships financed by foreign governments, universities, institutions or development partners. 

Officials may also participate in overseas training funded entirely by external sources, while mandatory overseas components of government training programmes may continue at recognised foreign institutions.

The Finance Division has also suspended spending from block allocations under the operating budget throughout the fiscal year.

No operating budget funds may be used to construct new residential, non-residential or other buildings. Ongoing projects that have achieved at least 70% physical progress may be completed with prior approval from the Finance Division.

The circular further prohibits the use of operating budget funds for land acquisition.

Similar restrictions have been imposed under the development budget, where the purchase of all types of vehicles has also been suspended. However, exemptions may be granted for projects approved before the issuance of the circular.

Land acquisition under development projects will be permitted only after completing all legal formalities and obtaining approval from the Finance Division.

The circular also said that funds allocated under the Planning Commission's “Development Assistance for Special Needs” programme may be spent only with prior approval from the Finance Division.

For pre-shipment inspections (PSI) and factory acceptance tests (FAT), overseas travel should be undertaken only when dealing with technically complex products or where such inspections are mandatory. In such cases, only subject-matter experts or technically certified officials should be nominated.

The Finance Division said the measures have been introduced to ensure the efficient use of limited public resources, help bring inflation to a tolerable level and support overall macroeconomic stability. It also instructed all government entities to prioritise testing through internationally recognised institutions wherever possible and ensure value for money in all public expenditure.