Nepal Budget 2082/83: Hopes for Economic Recovery Amid Crisis

At present, Nepali citizens are awaiting the budget for the upcoming fiscal year 2082/83. Due to the constitutional provision requiring the federal government to present the budget on Jestha 15 (May 28), the government is in a rush to finalize it. As we approach this budget season, it is essential to analyze the expectations and challenges associated with the upcoming budget. Nepal's economy is currently going through a transitional phase. Post-COVID economic slowdown, declining consumption, shrinking private investment, increasing import dependency, and decreasing production capacity have all brought the country to the edge of a long-term structural economic crisis. In such a backdrop, the new fiscal year’s budget must go beyond merely listing income and expenditures. It must serve as a national economic roadmap focusing on economic recovery, inclusive development, job creation, and increased production.

Current Economic Situation

There is still about one and a half months left before the end of the current fiscal year. However, looking at the current status of budget implementation, only 64% of the total allocated budget has been spent so far. During this period, while government revenue stands at NPR 977 billion, expenditures have exceeded NPR 1.191 trillion, leading to a budget deficit of NPR 214 billion. By the end of the fiscal year, this figure is expected to increase further.

Out of the total budget of NPR 1.86 trillion, the revised expenditure estimate is NPR 1.692 trillion. Of this, current expenditure accounts for 69.97%, while capital expenditure remains very low — only 36.18% of the target has been spent.

Likewise, revenue collection is only 66.92% of the target, and foreign grant receipts have reached merely 31% of their target. During this period, the government borrowed NPR 390 billion and repaid NPR 380 billion in debt. However, total public debt has now reached NPR 2.622 trillion. In the current fiscal year alone, NPR 188.30 billion in new debt has been added, which exceeds 43% of the Gross Domestic Product (GDP).

Among external indicators, remittance inflows have increased by 10%, reaching NPR 1.191 trillion. The current account shows a surplus of NPR 210.22 billion, and the balance of payments has a surplus of NPR 346.23 billion. Foreign exchange reserves have increased by 18.9%, reaching NPR 2.426 trillion as of the end of Chaitra 2081. These reserves are sufficient to cover 17 months of goods imports and 14 months of goods and services imports. However, trade deficit continues to worsen with increasing trade volume. By the end of Baisakh, total trade reached NPR 1.692 trillion, with imports alone accounting for NPR 1.741 trillion. According to the Department of Customs, the trade deficit stood at NPR 1.256 trillion, about 7% higher than the same period last year.

Past Budget Implementation Status

Analyzing budget implementation and revenue collection in the past shows a bleak picture. Budget implementation rates in Nepal have been consistently low. When a budget of NPR 1.751 trillion was announced for FY 2080/81, only 79.55% or NPR 1.393 trillion was spent. In FY 2078/79 and 2079/80, the expenditure rates were 79.51% and 79.23%, respectively. Capital expenditure remained limited to 58% in FY 2079/80 and did not exceed 62% in 2080/81. Delays in project planning, late budget approvals, issues in procurement processes, political interference, and lack of technical capacity are some of the major reasons behind weak implementation.

Economic Growth Trend

In the past two fiscal years, Nepal's economic growth rate has been far below target. In 2079/80, growth was only 1.86%, and in 2080/81, it hovered around 3%. According to the Central Bureau of Statistics, the estimated growth rate for FY 2081/82 is 5.81%. Factors such as climate-related issues in agriculture, stalled construction activities, reduced private investment, declining exports, and subdued domestic demand have contributed to this sluggish performance.

Private sector contribution is vital for Nepal’s economic growth. However, the private sector is currently grappling with uncertainty, tax burdens, investment insecurity, and market contraction. The lack of long-term planning and reform programs from the government has negatively impacted sustainable growth.

Inflation Status

Nepal's current annual inflation rate based on the consumer price index is around 6–7%, with the latest figure at 5.69%. Inflation is particularly high in sectors such as food, fuel, and transportation. Key causes include import dependency, supply chain imbalances, and weak market regulation.

To control price hikes, the government must strengthen the supply system. Measures like providing goods at affordable rates through cooperatives and consumer organizations, use of technology in supply monitoring, promoting competitive markets, adjusting customs and tax policies, and directly intervening in price control if necessary, are vital. Additionally, boosting production and promoting domestic goods can help control inflation in the long term.

Recommendations for Economic Reform

Ahead of the budget, the government has issued the Economic Reform Implementation Action Plan, 2082, to enforce the recommendations of the High-Level Economic Reform Recommendation Commission (2081). The plan includes reforms to be completed within three years. Key points include narrowing the interest rate spread between loans and deposits within a year, developing the bond market to reduce interest rate volatility, cutting government expenditure, reducing indirect tax rates to control inflation, and conducting a study on an alternative exchange rate regime for the Indian rupee within a year.

Legal reforms include repealing 14 outdated laws within two years (e.g., Black Market Act, Stamp Duty Act, Birta Abolition Act). Social security reforms will require a national ID card to receive senior citizen allowances and set the eligibility age to 70. Administrative reforms include restructuring government operations based on federalism, bringing all levels of government under a single account system, and developing an integrated project bank information system.

For public enterprise reform, entities like Janakpur Cigarette Factory, Butwal Yarn Factory, Nepal Engineering Consultancy, and National Construction Company will be dissolved, and their assets transferred to the government. Hetauda and Udayapur Cement industries will be merged and partially privatized, Nepal Airlines will be restructured with external partnership, and Dairy Development Corporation will be converted into a provincial public institution.

Tax system reforms include limiting excise duties to goods that harm health or the environment, linking local and provincial taxes to PAN, and levying only 10% income tax on exports.

Budget Expectations

The upcoming budget must clearly outline realistic and result-oriented priorities. Based on inputs from the National Planning Commission, Nepal Rastra Bank, the private sector, and international partners, the tax base must be widened. The tax system should be simple, transparent, and technology-driven. For effective expenditure, there should be clear timelines during planning, skilled manpower deployment, and a robust progress tracking system.

Supportive programs such as concessional loans, tax rebates, technology transfer, and market access should be designed for sectors like agriculture, small and cottage industries, tourism, energy, and construction to create employment. Investment in productive sectors under public-private partnership should be encouraged.

To increase national production, targeted investments are necessary in roads, electricity, irrigation, IT, and urban infrastructure. Along with physical infrastructure, digital infrastructure should be made inclusive, especially in rural areas. Education and health must be prioritized to develop human capital. Specific programs to improve public schools, healthcare institutions, digital education, and rural healthcare access must be introduced.

Also, the budget process should adopt policy stability, coordination, and result-based monitoring systems. Public procurement, contract management, and coordination among local governments must be strengthened.

With public debt rising, it should be kept within a transparent and sustainable framework, and its effectiveness must be enhanced. An integrated debt management strategy must be a top priority.

In conclusion, although most components of the FY 2082/83 budget are already being drafted, the government seems to be preparing to treat this as an economic transition period. Therefore, this budget could become a turning point for Nepal’s long-term economic recovery. However, the budget must act not just as a spending plan but as a tool for reform, a signal of policy stability, and an instrument of execution. It must learn from past weaknesses and address economic imbalances. If based on four core principles—honesty in revenue collection, discipline in spending, transparency in policy, and security and incentive in investment—this budget can take concrete steps toward economic prosperity.