NRB Data: Federal Government’s Budget Deficit Widens as Expenditure Outpaces Revenue Growth

Nepal’s federal budget deficit has widened in the first two months of the fiscal year 2025/26, as government spending has grown faster than revenue mobilization, according to the latest Nepal Rastra Bank (NRB) report on Government Budgetary Operations. The data show that while revenue mobilization reached Rs 157.53 billion, total expenditure soared to Rs 163.47 billion, creating a budget deficit of Rs 23.96 billion during the review period.

The report notes that total government resources, including revenue and grants, stood at Rs 139.51 billion, significantly below the Rs 163 billion spent by the federal government. The revenue growth slowed compared to last year’s figures, despite consistent collection from customs, VAT, and income taxes. Federal government revenue accounted for Rs 135.88 billion, while foreign grants added only Rs 2.46 billion, highlighting limited inflows of external aid.

To bridge the gap, the government relied on borrowing and loans, raising Rs 70 billion from domestic development bonds and Rs 10.05 billion in foreign loans. The total sources of financing reached Rs 80.15 billion, which partially covered the deficit but still left a shortfall that added to the overall fiscal pressure.

At the provincial level, government resources stood at Rs 25.15 billion, compared to expenditure of Rs 4.12 billion, generating a surplus of Rs 21.03 billion. Similarly, local governments saw a positive balance of Rs 36.49 billion, indicating that while federal spending remains high, subnational expenditure execution remains comparatively low.

As of mid-September 2025, the cash balance of the general government—including all levels of government—stood at Rs 255.61 billion, including Rs 116.55 billion in local government deposits, showing strong liquidity but uneven fiscal performance. Economists warn that persistent mismatches between spending and revenue growth could increase the government’s reliance on debt financing and affect macroeconomic stability.

They emphasize that for sustainable fiscal management, Nepal must focus on broadening its tax base, enhancing project execution efficiency, and containing recurrent expenses while channeling spending into productive capital investments that drive long-term growth.