Kathmandu-Sharp internal disputes have arisen within the government over plans to release several development budgets frozen by the Sushila Karki-led government under its fiscal discipline and austerity policy.

The dispute centers on 533 small-scale and poorly prepared development projects under the Ministry of Urban Development. Pressure has mounted on the Ministry of Finance to release nearly Rs 17 billion allocated to these projects.

Following the Gen Z movement, the newly formed government froze development spending worth around Rs 120 billion to curb unproductive expenditure.

After a Cabinet decision, the Ministry of Finance issued a 15-point circular directing agencies not to spend on projects lacking preparation, being small and fragmented, duplicating work, or requiring provincial or local government implementation.

The Ministry of Urban Development, the most affected, has 1,280 development programs frozen. It has formally proposed the release of funds for 533 programs to move forward with projects based on priority.

Former Minister Kulman Ghising, who resigned amid allegations of engaging in party politics while serving in the interim government and preparing for elections, had pressured the Ministry of Finance to release funds for small-scale projects.

While overseeing three development ministries, Ghising had earlier secured the release of around Rs 40 billion in frozen budgets.

Finance Minister Rameshwar Khanal, however, favors maintaining the freeze to save Rs 120 billion by blocking fragmented projects.

Following allegations that then urban development minister Prakash Man Singh widely misused budget allocations in the current fiscal year, around Rs 40 billion allocated to the Ministry of Urban Development, including the Department of Urban Development and Building Construction, was frozen.

Since the budget was frozen through a Cabinet decision, its release also requires Cabinet approval.

As a result, the Ministry of Finance must take the Urban Development Ministry’s proposal to the Cabinet. This has directly tied the issue of budget release to a political decision.

Experts have warned that prolonged freezes on development spending could harm the construction sector, employment, and the broader economy.

The Ministry of Finance, however, continues to argue that small, scattered, and poorly prepared projects weaken the overall effectiveness of development spending.