Fresh austerity measures on govt spending, ban on vehicle purchases, building construction

The government has imposed further restrictions on public spending to implement the budget for the current 2026–27 fiscal year.

The purchase of new vehicles, participation in overseas training and seminars funded by the government, and construction of new buildings have been suspended. At the same time, the government has decided to reduce the number of development projects and increase allocations for important ones.

The Finance Division of the Ministry of Finance issued a circular on Monday outlining these directives for the preparation of the revised budget.

According to the Finance Ministry's instructions, total expenditure in the revised budget must remain within the limit set in the original budget. No ministry or division will be allowed to seek additional allocations. Instead, allocations within the original budget must be rearranged for sectors necessary to implement the government's priorities, policies and election manifesto.

The instructions have been sent to all ministries, divisions and relevant institutions. They have been asked to submit proposals for the revised budget for the current fiscal year by 26 November.

According to the Finance Ministry's directives, spending on allocations for purchasing all types of vehicles will remain suspended during the current fiscal year. However, approval from the Finance Division will be required to replace vehicles listed under the Table of Organisation and Equipment (TO&E) that are more than 10 years old, as well as to purchase necessary vehicles for newly established government institutions.

In such cases, except for ambulances and vehicles used for security purposes, all replacement or newly purchased vehicles must be electric vehicles. However, this condition may be relaxed for development projects approved before 8 July 2026.

The Finance Ministry has also directed that the construction of new residential, non-residential and other buildings will remain suspended, except for facilities under the education, health and agriculture ministries. However, if 70 per cent or more of a building's construction has been completed, the remaining expenditure may be incurred with approval from the Finance Division. Separate approval will also be required for constructing other buildings in cases of emergency.

No allocation can be made for interest-free special advance loans to government employees for purchasing vehicles. Allocations for land acquisition under the operating budget have also been prohibited.

The Finance Ministry has said that participation in overseas training, seminars, symposiums and workshops funded by the government will remain suspended. However, allocations for foreign travel and training may be made on a limited scale in cases deemed essential, subject to approval from the appropriate authority.

Allocations may still be made for hospitality, seminars and organising events. However, the ministry has instructed officials to avoid extravagance and ensure cost-effective spending in these areas.

The Finance Division has instructed authorities to limit the number of projects in the revised Annual Development Programme (ADP). Important projects aligned with the government's strategic goals and election manifesto are to be selected. Less important projects must be dropped if necessary. The directive also states that no project without an allocation can be included in the main section of the revised ADP.

Priority has been given to projects being implemented with foreign loans and grants, human resource development, agriculture, power generation, agro-based industries, the environment, climate change mitigation and disaster management. Projects scheduled for completion in the current fiscal year will also receive priority.

The Finance Ministry has instructed authorities to reduce allocations for slow-moving projects and redirect the funds to important projects that can be implemented quickly. It has also advised grouping small projects of a similar nature into cluster projects, where appropriate, instead of keeping them separate.

In addition, priority has been given to allocating the necessary local currency to ensure the utilisation of foreign loans and grants. Allocations for new projects may be proposed only after ensuring the availability of the required local currency for ongoing projects.

The directive states that the 2026 national pay structure must be followed when preparing the revised operating budget. For this purpose, actual expenditure on salaries and allowances in October of the current fiscal year may be taken into consideration.

The Finance Ministry has also said that, while preparing revised estimates of revenue income and operating expenditure, authorities must consider the actual trends in revenue and expenditure during the first six months of the previous two fiscal years and the first four months of the current fiscal year.