The news is so bad that the prime minister was perspiring as he read the budget speech at the NPC on 8 July. Kathmandu has always had a problem spending its development budget and this has got worse with the insurgency. Donors are now paying nearly our entire development bill. Revenue collection is so dismal, it is barely enough to pay for recurrent expenditure, which will overshoot regular spending this year. Civil service salaries have hit the ceiling, and defence and security expenses are up by Rs 3.66 billion-a nearly 35 percent increase from last year.

The army will get Rs 2.34 billion for expenses other than for personnel, including Rs 255 million for helicopters, fixed-wing aircraft, assault rifles, machine guns and 5,000 new enlistments. The ISDP will get Rs 1.35 billion, more than double last year's allocation. The civilian police gets Rs 817 million over its usual expenses, and the paramilitary armed police gets Rs 506 million over its personnel costs. The price tag for the elections is Rs 1.5 billion, not including indirect costs such as civil service deputation and extra security. Costs for the royal household and palace will triple to Rs 387 million.

In addition to all this, the army has been asking for Rs 17 billion in upgrades over the next three years. There is the danger of a sharp rise in government spending before polls as it front-loads spending. The government is unlikely to get the budget support it is seeking from donors before the elections-they have their own disbursement cycles, and are also wary of the spending frenzy of a caretaker government.