The budget presented for the fiscal year 2006/07 by Finance Minister Ram Sharan Mahat at the House of Representatives on Wednesday has reduced royal palace's expenditure by over 70 percent.

Of the total Rs 143.91 billion, government allocated Rs 83.76 billion for regular expenditure, Rs 44.97 billion for capital investment and Rs 15.168 for payment of principal amounts of loans.

The new budget aims to raise Rs 85.37 billion from internal revenue, Rs 23.72 billion from foreign grants and Rs 16.90 billion from foreign loans. The deficit budget for the year 2006/07 stands at Rs 22.451 billion. This budget has placed priority to rural infrastructure, rehabilitation, reconstruction and new education programs. Income tax rate applicable on alcohol, beer and cigarette has also been raised by five percent.

The budget offered 10 percent dearness allowances to civil servants, development plans for the Karnali region, and assistance to the families of those killed during the 10-year armed conflict. Palace's expenditure has been cut by over 70 percent from last year. In the current fiscal year (2005/06), a total of Rs 749.1 million was released to the royal palace. Of this amount, Rs 405 million was initially allocated in the different headings of the budget and additional Rs 344.1 million was released later during the year. A total of Rs. 219.7 million has been allocated to the royal palace for the next fiscal year (2006/07).

Similarly, the budget allocated Rs 1.25 billion to conduct the constituent assembly elections, to be held by mid-April next year. The government has also increased the annual budget granted to VDCs from Rs 500,000 to Rs 1 million.

Mahat said that the violent conflict in the country would come to an end through the dialogue between government and the Maoists. Mahat also assured that the closed factories and business will reopen, private sector investment will significantly increase in the country due to stability in policy, capital investment will soon rise by a higher rate due to huge public investment in rural infrastructure and rehabilitation and reconstruction programs.