Roadmap For Change

The government budget is an annual plan through which the state outlines its fiscal policies, including taxation and expenditure measures. It is both an economic and a political document, through which the government, led by one or more political parties, seeks to influence the national economy to achieve predetermined socio-economic objectives. Fiscal policy also serves as an important instrument for stabilising economic fluctuations that emerge periodically. As fiscal policies directly affect the economic lives of individuals and businesses, the annual budget is closely scrutinised and analysed by people from all walks of life to assess the performance and priorities of the government and the ruling parties.

With an aspiration to achieve 7 per cent economic growth, Finance Minister (FM) Dr. Swarnim Wagle unveiled a budget of Rs. 2,124.34 billion for fiscal year 2026/27 in a joint session of Parliament on Friday. The budget allocates Rs. 1,270.58 billion for recurrent expenditure, Rs. 431.10 billion for capital expenditure and Rs. 422.64 billion for financial arrangements. These allocations account for 59.8 per cent, 20.3 per cent and 19.9 per cent of the total budget, respectively. The budget size is 25.2 per cent higher than the revised estimate for the current fiscal year. To finance the projected expenditure, the government aims to mobilise Rs. 1,405.31 billion in revenue from domestic sources. The remaining resource gap will be met through Rs. 61.74 billion in foreign grants, Rs. 247.28 billion in foreign loans and Rs. 410 billion in domestic borrowing.

Presenting the budget, Finance Minister Dr. Wagle stated that he viewed the exercise not merely as a constitutional formality but as a responsibility to transform the character of the state, the culture of governance and the structure of the economy. The budget seeks to promote a production-oriented economy, strengthen Nepal's international standing and accelerate technology-driven transformation. The FM emphasised the need to end policy inconsistencies, bureaucratic delays, institutional capture and the misuse of public resources while establishing a results-oriented governance system. Through the budget, the government has pledged to accelerate capital expenditure through procurement reforms, greater flexibility in resource management, alternative financing mechanisms and stability in project leadership.

Moreover, the proposed formulation of a sunset law for development projects, the introduction of a mechanism to track mobilisation advances, the preparation of a pipeline of infrastructure projects under a hybrid annuity model and relief measures for construction contractors affected by rising costs are among the major initiatives aimed at addressing Nepal's chronic weakness in capital spending. The budget also introduces several noteworthy measures intended to boost business confidence and stimulate economic activity. These include the development of regional economies under the concept of "Growth Poles and Quadrangles" based on local resource endowments, an increase in the personal income tax exemption threshold to Rs. 1 million, a reduction in the maximum personal income tax rate, the abolition of excise duties on 360 items, reduced customs duties on 273 categories of industrial raw materials, incentives for start-up enterprises, public-private partnerships for the operation of sick industries, subsidies of up to 40 per cent for farmers and a salary increase for government employees.

The government has also announced austerity measures by proposing the closure of 31 public entities, the merger of six institutions and the restructuring of 18 others. Greater emphasis on infrastructure development, reforms in the health insurance system and allocations for research and development are among the other positive features of the budget. In a broad sense, the budget reflects the government's attempt to respond to the changed political mandate that emerged after the Gen Z-led public awakening and demand for better governance. The budget offers a roadmap for economic transformation, but its credibility will ultimately be measured not by its promises, but by its implementation.