Govt suspends vehicle purchases, foreign travel and new building projects under austerity measures

Highlights

• The Finance Division also suspended the interest-free special loan facility
• Govt suspends purchases of vehicles under both operating and development budgets
• Foreign travel at government expense halted, with limited exceptions
• New building construction and land acquisition face strict spending restrictions
• Measures introduced to curb expenditure and support macroeconomic stability

The government has imposed sweeping expenditure controls for FY27, suspending the purchase of all types of vehicles, restricting foreign travel at public expense and halting spending on new building construction as part of its austerity measures.

The Finance Division issued a circular today (8 July), saying the measures have been introduced to ensure prudent use of limited public resources, bring inflation to a tolerable level and maintain macroeconomic stability.

Under the circular, no funds allocated under either the operating or development budgets may be used to purchase motor vehicles, watercraft or aircraft during the current fiscal year.

The Finance Division 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 purchase vehicles with prior approval from the Finance Division.

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

The government has also suspended all foreign travel funded by public money for training programmes, seminars, symposiums and workshops.

According to the circular, exceptions will be allowed for Master's and PhD programmes undertaken under scholarships or fellowships funded by foreign governments, universities, institutions or development partners.

Officials may also participate in overseas training financed by foreign governments, institutions or development partners. In addition, the overseas components of mandatory training programmes offered by government training institutes may be conducted at recognised foreign universities or institutions.

The circular said spending from block allocations under the operating budget will remain suspended throughout the fiscal year.

It also prohibited expenditure from the operating budget for constructing new residential, non-residential or other buildings. Ongoing construction projects that have already achieved at least 70% physical progress may be completed with approval from the Finance Division.

No operating budget funds may be used for land acquisition, the circular added.

Similar restrictions apply to the development budget, under which the purchase of all types of vehicles has also been suspended. However, the restriction may be relaxed for projects approved before the issuance of the circular.

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

The circular also said funds reserved under the "Development Assistance for Special Needs" allocation for the Planning Commission may be spent only with prior approval from the Finance Division.

For pre-shipment inspections (PSI) or factory acceptance tests (FAT) under both operating and development budgets, overseas travel should be considered only for technically complex products or where PSI is mandatory. In such cases, only subject-matter experts or technically certified officials should be nominated.

The Finance Division also instructed government agencies to prioritise testing through internationally recognised institutions wherever possible and ensure value for money in all other public expenditure.