Budget Outlook 2025/26: From Deficit to Surplus – Is Nepal Entering Fiscal Stability?

Nepal’s public finances appear to be turning a corner. According to the government’s budgetary operations up to mid-August 2025/26, the country has recorded a budget surplus of Rs. 31 billion, reversing years of chronic fiscal deficits. This turnaround—fueled by higher revenue mobilization, controlled spending, and growing foreign inflows—marks a potential shift toward fiscal stability after a period of post-pandemic turbulence and political uncertainty.

The Ministry of Finance data shows that total government resources reached Rs. 75.4 billion in the first month, supported mainly by strong revenue of Rs. 84.7 billion and foreign grants of Rs. 1.6 billion. On the expenditure side, the government spent Rs. 44.3 billion, of which recurrent costs continued to dominate, though capital spending is slowly improving as infrastructure projects resume under new budget execution guidelines. The resulting surplus has boosted the overall cash balance to Rs. 226 billion, providing one of the strongest fiscal cushions in recent memory.

Economists say the shift from deficit to surplus reflects improved fiscal discipline and better treasury management. Stronger domestic borrowings through treasury bills and development bonds (Rs. 40 billion) have also allowed the government to manage cash flow efficiently without heavy reliance on short-term overdrafts. However, they caution that the real test lies ahead—whether the government can sustain this momentum once capital expenditures accelerate and debt repayments mount later in the fiscal year.

In the broader context, Nepal’s fiscal outlook for 2025/26 appears cautiously optimistic. With revenues outpacing spending and reserves at record highs, the country has a rare opportunity to strengthen its macroeconomic fundamentals. If transparency, project implementation, and fiscal discipline continue improving, Nepal may be entering an era of measured fiscal stability after years of imbalance.