Nepal’s Government Revenue Falls 5.3% to Rs 157.53 Billion in First Two Months of FY 2025/26 – MoF Report

Nepal’s total government revenue declined by 5.3% year-on-year, reaching Rs 157.53 billion during the first two months of the current fiscal year 2025/26, according to the latest data published by the Ministry of Finance (MoF). The downturn reflects slower economic activity, reduced imports, and declining non-tax receipts compared to the same period of the previous year.

The report shows that Value Added Tax (VAT) remained the single largest revenue contributor, generating Rs 52.14 billion, up by 3.9%, and accounting for 32.9% of total revenue. Customs revenue increased moderately by 7.5%, reaching Rs 35.39 billion, supported by a mild rebound in import volumes. However, income tax collections fell by 8.5% to Rs 33.05 billion, reflecting weaker profitability among businesses and lower corporate tax inflows.

Among other key sources, excise duty rose 14.4% to Rs 28.95 billion, while educational service tax increased 31.4% to Rs 854 million, indicating stronger compliance in service-related sectors. In contrast, non-tax revenue — which includes dividends, royalties, and administrative fees — dropped sharply by 66.3% to just Rs 7.13 billion, compared to Rs 21.19 billion during the same period last year.

Including other receipts, total government revenue and receipts amounted to Rs 158.71 billion, representing a 6.4% decline from the previous year. The decline in non-tax revenue and reduced import growth have been identified as major contributors to the shortfall.

Economists note that while the fall in tax collection signals a slowdown in economic momentum, the government’s moderate rise in customs and excise revenue indicates that trade and consumption are gradually stabilizing. However, the steep drop in non-tax income — particularly from dividends and fees — underscores the need for improved revenue diversification and state enterprise reform.

The Ministry of Finance is expected to focus on enhancing tax compliance, digitizing revenue systems, and reviving economic sectors to strengthen revenue performance in the coming quarters.