In accordance with the constitutional mandate on Republic Day, Finance Minister Dr. Swarnim Wagle is set to present the federal budget for the fiscal year 2026/27 (2083/84 BS) before a joint session of the Federal Parliament today at 4:00 PM.Speaker Dol Prasad Aryal has instructed all lawmakers to be in their seats by 3:45 PM sharp to witness a fiscal plan that aims to balance ambitious long-term transformation with severe, short-term economic constraints.
The upcoming budget presentation carries unprecedented political and economic weight. It represents the first comprehensive annual budget under the Rastriya Swatantra Party (RSP) leadership, operating within a coalition heavily influenced by the high-energy governance standards of Kathmandu Mayor Balendra Shah. Driven by the RSP’s core manifesto to build a $100 billion national economy over the next five to seven years, Dr. Wagle has championed this package as a “second wave of structural economic reform,” prioritizing good governance, digital service delivery, administrative consolidation, and private-sector confidence.
Breaking the Fiscal Ceiling
Despite Dr. Wagle’s long-standing public opposition to oversized, populistic budgets, the Ministry of Finance has ultimately decided to push past the initial fiscal constraints. The National Resource Estimation Committee under the National Planning Commission had originally capped the budget ceiling at Rs 1.89 trillion. However, following intense internal negotiations, the final budget package is expected to sit between Rs 2.1 trillion and Rs 2.2 trillion.
The expanded budget intends to aggressively fund critical, near-complete “National Pride” infrastructure projects and heavily pump resources into the energy sector, including expanded funding allocations for the Nepal Electricity Authority (NEA). Additionally, the government is introducing an alternative infrastructure financing framework designed to tap into overseas diaspora capital by offering structural incentives to affluent non-resident Nepalis. Concurrently, a controversial internal debate remains active regarding the allocation of up to Rs 150 million per lawmaker for localized infrastructure projects, though officials stress that eligibility will depend strictly on compliance with the centralized federal project bank, environmental assessments, and pre-vetted feasibility timelines.
The Reality of a Widening Structural Deficit
While the policy blueprint speaks of austerity, administrative consolidation, and a planned 15% salary hike for struggling civil servants, it lands amidst intense fiscal turbulence. Independent economists and bodies like the South Asia Watch on Trade, Economics and Environment (SAWTEE) warn that the state’s structural deficit is widening dangerously. Over the last decade, Nepal’s national budget size has effectively doubled, but domestic revenue mobilization and capital expenditure (development spending) have consistently flatlined.
Data from the newly tabled 2025/26 Economic Survey highlights the depth of this trap:
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While the current fiscal year’s budget was set at Rs 1.964 trillion, actual revenue collection is projected to barely cross Rs 1.021 trillion.
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Recurrent expenditure—the mandatory costs of running the state, servicing interest, and fulfilling social security obligations—exceeds Rs 1.3 trillion, grossly outstripping the entire tax revenue stream.
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Private sector credit grew by a sluggish 4.4% despite high liquidity in the banking system, and non-performing loans (NPLs) have scaled up to 5.42%, signaling profound stress in the domestic market.
To bridge this massive structural chasm, Dr. Wagle’s budget will rely heavily on an aggressive mix of internal borrowing and foreign debt. This comes at a sensitive time: public debt has already reached 43.6% of the country’s Gross Domestic Product (GDP). Furthermore, due to stagnant industrial growth and global supply shocks, the government is reportedly preparing to formally request the United Nations to defer Nepal’s graduation from Least Developed Country (LDC) status to middle-income status by an additional three years to preserve preferential trade terms and international climate funding.
Private Sector Demands Structural Shifts
As Dr. Wagle walks the tightrope between public sector spending and austerity, the private sector—represented by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI)—is demanding systemic tax relief to revive the economy.
Business leaders have aggressively lobbied the Ministry of Finance to establish a singular, stable Revenue Code to replace the volatile annual practice of changing tax rates via the Economic Act. Top private sector demands include raising the minimum personal income tax threshold to Rs 1 million to relieve the middle class, adjusting capital gains tax, and addressing profit repatriation hurdles that have historically frozen foreign venture capital.
While the government’s economic status paper targets an ambitious 7% annual growth rate, international financial institutions like the World Bank project a more conservative 5.5% recovery. Dr. Wagle’s presentation at 4:00 PM will reveal exactly how the new administration plans to finance its lofty transformation goals without tipping the country deeper into a public debt trap.