AvailableNepali translation awaiting review

Taxation and public spending

Nepal's federal government plans to spend Rs 2,124.34 billion in 2026/27, about two-thirds of it covered by revenue and the rest by grants and borrowing. Year after year, a large part of the money set aside for building things goes unspent, while debt payments take a growing share of the budget. The open questions are who should pay more or less tax, how much to borrow and for what, and how to make sure that what is budgeted is actually built and delivered.

Long-term goalRaise enough revenue and keep debt sustainable while paying for development

The 16th Plan aims to raise federal revenue mobilisation to 23.5 per cent of GDP (the figure in its indicator table; the Plan's text gives 21.4 per cent) and to limit outstanding public debt to 39.0 per cent of GDP by 2085/86, while sharply increasing capital spending. In mid-July 2025 debt stood at 43.13 per cent of GDP. Reaching these targets takes several budget cycles and depends on all three levels of government.132

Contested choiceWho pays: the mix of income tax, consumption tax and taxes on imports

Value added tax is the largest single source of federal revenue, and by mid-March 2026 taxes collected on imports made up 47.1 per cent of all tax revenue. The 2026/27 budget doubled the personal income tax threshold to Rs 1 million, cut the top personal income tax rate by ten percentage points and abolished excise duty on 360 items, while adding new fees on some imports and studying whether VAT should have multiple rates. How the tax burden is shared between income, spending and trade is a real choice with different winners and losers.32927

Contested choiceHow much to borrow, and whether borrowing should pay only for investment

The 2026/27 budget plans Rs 247.28 billion in foreign loans and Rs 410 billion in domestic borrowing. Its own summary shows Rs 209.47 billion of domestic borrowing planned for current spending. The Auditor General found that in 2081/82 domestic loans paid for Rs 131.39 billion of current spending and said public debt should be spent on building capital. The IMF considers expansionary policy appropriate in the near term, followed by gradual consolidation. How much to borrow, and on what, is a choice between today's needs and future debt payments.164528

Urgent problemMoney set aside for building things keeps going unspent

In 2081/82 the federal government spent only 63.57 per cent of its capital budget, and 54 per cent of the capital spending it did make came in the last quarter of the year. For 2082/83 the capital estimate was revised to Rs 251.40 billion against an original allocation of Rs 409.17 billion. Each year of under-spending delays roads, power lines and services that budgets promised.51524

Urgent problemDebt payments are taking a growing share of the budget

Principal and interest payments on public debt rose from 15.7 per cent of federal expenditure in 2022/23 to 23.9 per cent in 2024/25, and reached 26.2 per cent of federal spending in the first eight months of 2025/26. Outstanding public debt reached Rs 2,878.30 billion by mid-March 2026. Money spent on debt service is not available for services or investment.20

Updated 2026-10-10 · Version 2 · Sources · Corrections & right of reply

Question 1

What is the issue, and why does it matter?

Most public money is raised and spent by the federal government. In 2024/25 the three levels of government together collected Rs 1,281.70 billion in revenue, 92.1 per cent of it by the federal government. Federal revenue was 16.65 per cent of GDP and federal spending 24.41 per cent of GDP; the gap was covered mainly by borrowing.12

Where federal revenue came from in 2024/25: value added tax 29.0 per cent, income tax 25.2 per cent, customs duties 19.6 per cent, excise duty 14.8 per cent, other taxes 0.3 per cent and non-tax revenue 11.0 per cent. Part of VAT and domestic excise is shared with provinces and local governments.3

Where federal spending went in 2024/25: 63.2 per cent on current spending (which in these figures includes grants to provinces and local governments), 14.8 per cent on capital spending and 22.0 per cent on financing, mostly repaying the principal of earlier loans. Capital spending was 3.61 per cent of GDP.24

Budgets are regularly larger than what is spent or collected. In 2081/82 the original federal budget was Rs 1,860.30 billion and Rs 1,513.25 billion (81.34 per cent) was spent. Revenue collection reached Rs 1,196.19 billion, 84.28 per cent of the Rs 1,419.30 billion target. The Auditor General noted that budgets are repeatedly revised down during the year and called for more realistic budgeting.5

Tax and spending decisions touch every household: what people pay at the shop and the border, what they pay on their income, and whether the roads, schools, clinics and transfers promised in the budget actually arrive. They also decide how much future taxpayers will owe.

Question 2

What do current law and policy say?

Constitution, Part 10 (federal financial procedures): no tax may be levied and no loan raised or guarantee given except under law (Article 115). Almost all federal revenue and loans go into the Federal Consolidated Fund (Article 116), and money can be spent from it only as charged on the Fund, under an Appropriation Act, an advance (vote on account) or a vote of credit (Article 117). Debt charges are among the items charged on the Fund, which do not need Parliament's vote (Article 118). The Finance Minister must lay the annual revenue and expenditure estimates before both Houses on 15 Jestha, together with what each ministry spent the previous year and whether its objectives were met (Article 119). Supplementary estimates, votes on account (at most one-third of the year's estimate), votes of credit and a contingency fund are allowed (Articles 121–124), and moving money between budget heads is governed by federal law (Article 125).6

Constitution, Articles 59–60: the federation, provinces and local levels each make their own budgets and financial laws within their powers. The Government of Nepal has the power to obtain foreign assistance and borrow loans, and must do so in a way that maintains macroeconomic stability; budget deficits and fiscal discipline at all three levels are to be governed by federal law (Article 59). Each level may levy taxes within its powers; the Government of Nepal must share collected revenue fairly, fiscal transfers to provinces and local levels follow the recommendations of the National Natural Resources and Fiscal Commission, and equalisation grants are based on spending needs and revenue capacity (Article 60).7

Who may tax what: customs, excise, VAT, corporate and personal income tax and remuneration tax are federal (Schedule 5, item 9). Provinces may levy house and land registration fees, motor vehicle tax, entertainment tax, advertisement tax, tourism tax and tax on agricultural income (Schedule 6, item 4). Local governments may levy property tax, house rent tax, land and building registration fees, motor vehicle tax, business tax, land revenue and other local fees (Schedule 8, item 4).8

Financial Procedures and Fiscal Responsibility Act, 2076 (amended 2081): the National Planning Commission must prepare a three-year medium-term expenditure framework every year (section 6). The Finance Ministry finalises the budget taking account of available resources, spending needs and the capacity to spend (section 10(3)). A deficit budget must show clearly how the deficit will be financed, and a deficit budget may not be presented to meet administrative expenses (section 15(2)–(3)). Projects are classified and entered in a national project bank kept by the Planning Commission (section 17). Money appropriated for capital spending may not be moved to current spending, and moving capital and financing money is done by the Finance Ministry (section 20(2)–(3)). Section 50 makes ministers and heads of constitutional bodies responsible for fiscal accountability. The consolidated text reviewed sets no numerical ceiling on the deficit or on debt.9

Public Debt Management Act, 2079: a Public Debt Management Office manages debt, including projecting each year's borrowing needs within the limit recommended by the National Natural Resources and Fiscal Commission (sections 3–4). The Government of Nepal may take foreign loans up to a total not exceeding one-third of the previous fiscal year's GDP at current prices (section 5(2)). Domestic borrowing by all three levels must stay within the Commission's recommended limit, and provinces and local levels need the federal government's consent (section 6(1)). The annual budget must include details of loans taken and guarantees given (section 20).10

Domestic borrowing ceiling recommended for 2083/84: the Constitution gives the National Natural Resources and Fiscal Commission the function of analysing macroeconomic indicators and recommending the ceiling on internal loans that the federal, provincial and local governments may raise (Article 251(1)(f)). In a recommendation dated 2082-11-27, the Commission recommended that federal domestic borrowing in 2083/84 not exceed 5.5 per cent of estimated GDP, and that provinces and local governments, with the federal government's approval, borrow domestically no more than 12 per cent of the sum of their revenue-sharing receipts and own-source revenue. It also suggested that domestic loans be used for projects that build capital and be strictly barred from current and administrative spending. This is the Commission's recommendation; the sources reviewed do not show whether or how the 2083/84 budget's planned domestic borrowing compares with it.111210

Current plan: the 16th Plan (2081/82–2085/86) projects total government spending of Rs 12,063.32 billion over the five years, with capital spending projected to rise from Rs 305.00 billion in 2081/82 to Rs 862.28 billion in 2085/86, and about Rs 1,842.02 billion of the plan period's financing coming from domestic borrowing. Its indicator table targets federal revenue mobilisation of 23.5 per cent of GDP (the Plan's text says 21.4 per cent) and outstanding public debt of 39.0 per cent of GDP by 2085/86.13

Current budget: the 2026/27 (2083/84) budget announces 'mission mode' reforms to capital spending — procurement reform, flexibility to move money between budget heads, alternative financing, stable project chiefs, a sunset law for development projects to be tabled in Parliament "within the current fiscal year", tracking of mobilisation advances and a pipeline of projects for a hybrid annuity model. It also announces austerity measures, including cuts to office running costs, which it estimates will save about Rs 20 billion.14

Question 3

What is known, uncertain or disputed?

Known

Federal budget figures from the 2026/27 budget annex (all three columns are different kinds of figure): total spending was Rs 1,513.25 billion actual in 2081/82, Rs 1,696.33 billion revised estimate for 2082/83 and Rs 2,124.34 billion budget estimate for 2083/84. Capital spending was Rs 223.98 billion actual, Rs 251.40 billion revised estimate and Rs 431.11 billion budget estimate (Rs 431.10 billion in the budget speech). Revenue (including revenue shared with provinces and local levels) was Rs 1,196.19 billion actual, Rs 1,300.23 billion revised estimate and Rs 1,580.32 billion budget estimate.15416

Main tax heads (budget annex 2): income, profit and capital gains taxes were Rs 288.92 billion actual in 2081/82 and are estimated at Rs 372.38 billion for 2083/84; VAT Rs 341.93 billion actual and Rs 388.84 billion estimated; customs duty and other import taxes Rs 183.97 billion actual and Rs 341.44 billion estimated; excise duty Rs 175.13 billion actual and Rs 254.99 billion estimated.17

Capital spending is well below plan targets. The Auditor General, using Finance Ministry data, reports federal capital spending of 3.67 per cent of GDP in 2081/82 against the 16th Plan's target of 6.20 per cent for that year, down from 6.26 per cent in 2075/76. The World Bank reports that capital spending across all three levels was 7.9 per cent of GDP in FY24, below the 10–15 per cent of GDP it estimates Nepal's infrastructure needs require each year.518

Spending is bunched at the end of the year. Of federal capital spending in 2081/82, 13, 12, 21 and 54 per cent was made in the first, second, third and fourth quarters respectively. The Auditor General also found Rs 18.22 billion moved between budget sub-heads in the last month (Asar) of 2081/82, out of Rs 46.68 billion moved during the year.5

Provinces and local governments also under-spend capital budgets. Local governments spent 76.4 per cent of their allocated budget and 65.6 per cent of their capital budget in 2081/82. By mid-March 2026 provinces had spent 15.5 per cent of their capital budget and local governments 16.8 per cent. The Auditor General found Rs 132.45 billion transferred to provinces and local levels sitting unspent in their consolidated funds, while the federal government was borrowing; he estimated this cost Rs 5.07 billion a year in extra interest.195

Debt: outstanding public debt was Rs 2,674.05 billion (43.13 per cent of GDP) in mid-July 2025, 52.6 per cent of it owed abroad. By mid-March 2026 it was Rs 2,878.30 billion — Rs 1,348.12 billion domestic and Rs 1,530.18 billion external — or 43.6 per cent of GDP. Multilateral lenders hold 90.68 per cent of external debt. Debt service in 2024/25 was Rs 361.65 billion: Rs 291.20 billion principal and Rs 70.45 billion interest.2021

Exemptions and arrears reduce what is collected. Customs exemptions recorded in the customs data system were Rs 85.23 billion in 2081/82, up from Rs 79.87 billion the year before; the Finance Ministry and Inland Revenue Department did not keep records of exemptions given on domestic revenue. Tax arrears reported by the Inland Revenue Department reached Rs 275.05 billion including interest, of which Rs 180.10 billion (65.48 per cent) was under judicial review.5

Audit results: the Auditor General's 63rd report audited Rs 9,484.51 billion of transactions for 2081/82 and found Rs 88.09 billion in new irregularities (beruju); the cumulative unsettled total reached Rs 755.17 billion. Accounts of 179 offices, worth Rs 147.90 billion, could not be audited because records were not submitted after the Bhadra 2082 protests.22

The tax base is growing. By mid-March 2026, 7,600,316 Permanent Account Numbers were registered (600,966 added since mid-July 2025), with 369,050 taxpayers registered for VAT and 130,902 for excise.23

Uncertain

Official year-end figures for 2082/83 (2025/26) were not available when this page was checked: the most recent consolidated financial statement listed on the Financial Comptroller General Office website on 10 October 2026 was for 2081/82. Until official figures are published, the 2082/83 figures below are preliminary. Official documents give different starting points: the Economic Survey's table shows an original federal capital allocation of Rs 409.17 billion, while the Kathmandu Post reported Rs 407.89 billion; the budget annex gives a revised capital estimate of Rs 251.40 billion, while the same report said the mid-term review cut it to Rs 243.30 billion. The Kathmandu Post, citing government data, reported that about Rs 190 billion (46.79 per cent of the annual target) had been spent on capital projects by 15 July 2026. These reported, preliminary figures should be replaced when official year-end accounts are published.24152526

The size of the deficit depends on the definition. The budget speech describes a 2083/84 deficit of Rs 657.29 billion (total allocation minus revenue and foreign grants, which counts loan repayments and investments as spending). The budget annex, which treats those items as financing, shows a budget deficit of Rs 234.63 billion. Both are official; they measure different things.1615

Borrowing figures differ between official sources. For 2081/82 the Economic Survey and the Auditor General report Rs 329.08 billion of domestic borrowing, while the budget annex shows Rs 234.55 billion of loans received from other institutions; the Auditor General's source-of-spending analysis, based on Finance Ministry data, attributes Rs 253.92 billion of that year's spending to domestic loans. The documents do not explain the differences. The Economic Survey also notes that public debt data from the Public Debt Management Office may differ from the Financial Comptroller General Office and Nepal Rastra Bank.220515

Whether the 2083/84 revenue estimate can be met is uncertain. The estimate (Rs 1,580.32 billion) is about 21.5 per cent above the 2082/83 revised estimate (calculated from the budget annex), while revenue in 2081/82 reached 84.28 per cent of its target. The IMF refers to a Tax Expenditure Report, but no published official report giving the full cost of all tax exemptions was found in this research; only customs exemptions are quantified in the sources reviewed.155

The 16th Plan's revenue target is stated two ways. Its text says federal revenue is to reach 21.4 per cent of GDP in the plan's final year, while its indicator table gives 23.5 per cent for federal revenue mobilisation in 2085/86. The page uses the table figure as the target and notes the difference.13

Disputed

Whether tax incentives help or harm. The 2026/27 budget adds new incentives — a 50 per cent tax rebate on IT service exports, ten years' full income tax exemption for agro-processing industries and for cinema halls outside metropolitan and sub-metropolitan cities — to promote investment. The Auditor General warned that the widening scope of revenue exemptions is putting pressure on the treasury and that exemptions recommended by agencies without checking eligibility have hurt revenue. The IMF urged Nepal to use its tax expenditure report to rationalise tax expenditures.27528

How fast to cut the deficit. The IMF's Executive Board agreed that expansionary fiscal policy is appropriate in the near term, followed by gradual consolidation. The 2026/27 budget raises total spending 25.2 per cent above the current year's revised estimate. The Auditor General, by contrast, stresses realistic budgets based on resources and spending capacity, noting that public debt is also being used for current spending.28165

Questions 4–5

What are the options, and what do they cost and achieve?

Options are listed in no particular order. Policy Nepal does not recommend one; real policies often combine them.

Broaden the tax base and cut back exemptions5282723

Raise more revenue without raising rates by bringing more activity into the tax net (digital billing, e-invoicing, registration), collecting arrears and reviewing exemptions, starting with a full public account of what each exemption costs.

Benefits
  • Can raise revenue without higher rates; customs exemptions alone were Rs 85.23 billion in 2081/82 and tax arrears Rs 275.05 billion.
  • Treats similar taxpayers more equally and makes the cost of special treatment visible to Parliament.
Costs
  • Businesses and sectors that benefit from exemptions lose them; some incentives are meant to attract investment.
  • Bringing small and informal businesses into the net adds compliance costs for them and administrative work for tax offices.
Trade-offs
  • The 2026/27 budget does both at once — it widens the net (mandatory central billing for large firms, microbreweries into excise) while adding new exemptions; the net effect on revenue is not known in advance.
What implementation needs
  • Publish and use a regular tax expenditure report covering customs and domestic taxes (the IMF urges using the Tax Expenditure Report to rationalise tax expenditures), and record domestic-revenue exemptions, which the Auditor General found were not recorded.
  • Carry out the budget's revenue administration measures: integrate businesses with turnover above Rs 100 million into the Central Billing Monitoring System, AI-assisted risk-based audit, digital excise stamps and track-and-trace.

Change the tax mix between income, consumption and imports29273038

Decide deliberately how much to rely on income tax, on VAT and excise, and on taxes collected at the border, rather than letting the mix drift. The 2026/27 budget moved towards lighter income tax and fewer excise items; other choices would rely more on income or property taxes, or less on import taxes.

Benefits
  • Lower income tax can leave more money with salaried and middle-income earners, which the budget says is its aim.
  • Relying less on import taxes would make revenue less dependent on import volumes, which made up 47.1 per cent of tax revenue by mid-March 2026.
Costs
  • Cutting income tax or excise reduces revenue unless other taxes rise or the base grows; consumption taxes such as VAT fall on all households, including poorer ones.
  • VAT and domestic excise are shared with provinces and local governments, so shifting between taxes also changes how much they receive.
Trade-offs
  • Taxes at the border are easier to collect but depend on imports; income and property taxes link payment more to ability to pay but need stronger administration and records.
  • Who gains and who pays depends on the direction. A higher income tax threshold and a lower top rate benefit people who pay income tax, and the top-rate cut goes to the highest earners; people below the threshold gain nothing directly. Relying more on VAT and excise weighs more on households that spend most of their income; relying more on income and property taxes weighs more on higher earners and owners of property, and may affect saving and investment.
What implementation needs
  • Use the high-level committee the budget announced on multiple VAT rates, and publish analysis of who gains and who pays under each change.
  • Coordinate with provinces and local governments, which hold property, vehicle and other taxes under Schedules 6 and 8, and resolve double taxation as the budget proposes.

Re-balance spending between capital investment and current services18514913

Change what the budget is spent on: either protect and grow capital investment (as the 16th Plan projects) by holding down current costs, or give priority to current spending on staff, social security and services that people use now.

Benefits
  • More capital spending could close the gap the World Bank identifies between current investment (7.9 per cent of GDP in FY24) and needs (10–15 per cent).
  • Prioritising services and transfers protects benefits people receive directly, such as social security and teachers' and health workers' pay.
Costs
  • Larger capital budgets do not help if they go unspent, as about 36 per cent of the federal capital budget did in 2081/82.
  • Cutting current spending can mean fewer staff or lower service levels; much of it (salaries, pensions, interest, grants to provinces and local levels) is hard to cut quickly.
Trade-offs
  • New roads, schools and hospitals create running costs later; services today compete with assets that pay off over decades.
What implementation needs
  • Follow through on the budget's austerity measures (estimated savings about Rs 20 billion) and its plan to dissolve, merge or restructure public bodies, and report the actual savings.
  • Use the medium-term expenditure framework (FPFR Act section 6) to show the future running costs of new capital projects before they are approved.

Set firmer fiscal rules and debt limits in law910111352820

Write numerical limits into law — for example on the deficit, on total debt, on debt service, or a rule that borrowing may only pay for investment — and give an independent body the job of checking them. Today the FPFR Act has no numerical deficit or debt ceiling; limits exist only for foreign loans (Public Debt Management Act) and through the domestic borrowing ceilings that the National Natural Resources and Fiscal Commission recommends each year. For 2083/84 it recommended 5.5 per cent of estimated GDP for the federal government and 12 per cent of revenue-sharing receipts plus own-source revenue for provinces and local governments; these are annual recommendations, not a standing rule in the FPFR Act.

Benefits
  • Clear limits make it harder to let debt and debt service keep rising, and help keep the 16th Plan's aim of debt at 39.0 per cent of GDP.
  • A rule that loans fund only investment would respond to the Auditor General's finding that borrowed money was used for current spending.
Costs
  • Rigid limits can force spending cuts during downturns or disasters, when temporary support may be needed; the IMF, for example, currently considers expansionary policy appropriate in the near term.
  • Rules can be met on paper through accounting choices unless definitions and reporting are clear — official deficit and borrowing figures already differ by definition.
Trade-offs
  • Firm rules increase predictability and discipline but reduce room to respond to shocks; escape clauses restore flexibility but weaken the rule.
  • Borrowing spreads the cost of today's spending onto future taxpayers, which can match the cost of long-lived assets to the people who use them but adds to future debt service; cutting borrowing quickly puts the cost on today's taxpayers and service users through higher taxes or lower spending.
What implementation needs
  • Amend the FPFR Act or Public Debt Management Act to add the chosen limits, with exceptions defined for disasters and emergencies.
  • Publish one reconciled set of debt and deficit figures from the Finance Ministry, the Financial Comptroller General Office and the Public Debt Management Office.

Fix how capital projects are planned, procured and paid for1428189315

Focus less on the size of the capital budget and more on getting it spent well: only budget projects that are ready (land, studies, designs), reform procurement and land acquisition, spread spending across the year, and manage cash so that transferred money does not sit idle.

Benefits
  • Directly targets the under-spending and end-of-year rush documented by the Auditor General, the Economic Survey and the World Bank.
  • Better cash management could reduce the extra interest the Auditor General estimated at Rs 5.07 billion a year from idle transfers.
Costs
  • Results take years and depend on many agencies, contractors and local governments, not just the Finance Ministry.
  • Faster procurement and more flexibility to move money between budget heads can raise risks of misuse unless audit and oversight keep pace.
Trade-offs
  • Funding only ready projects may mean smaller headline budgets and fewer new projects announced each year.
What implementation needs
  • Carry out the budget's measures (mission-mode project delivery, sunset law, tracking mobilisation advances) and the IMF-recommended public investment management action plan and National Project Bank guidelines.
  • Apply existing rules: budget by capacity to spend (FPFR Act section 10(3)), enter projects in the project bank (section 17), and use the 2025 standards on source assurance for multi-year projects; amend procurement and land-acquisition rules as the World Bank recommends.

Combining options

These options are not exclusive, and the 2026/27 budget already mixes several: it cuts income tax and excise items (tax mix), adds billing and e-invoicing rules and new exemptions at the same time (base and exemptions), promises austerity in current spending, and announces mission-mode reforms for capital projects. Fiscal rules could sit alongside any of these. The main tensions are between cutting taxes and raising revenue to the targets in the 16th Plan, and between larger capital budgets and the capacity to spend them shown so far. Reforms to capital execution make every other option more effective, because unspent money neither builds assets nor saves the interest on borrowing.

Question 6

Who is responsible?

Federal
Federal Parliament

Approves taxes and borrowing by law, the annual Appropriation Act, supplementary estimates and votes on account; receives the annual estimates on 15 Jestha with each ministry's previous-year results; receives the Auditor General's annual report through the President and Prime Minister.632

Federal
Ministry of Finance (with the Inland Revenue Department and Department of Customs)

Prepares and presents the budget and revenue estimates, finalises allocations by spending capacity, approves movement of capital and financing money between heads, sets tax policy and runs tax and customs administration.6927

Federal
National Planning Commission

Prepares the periodic plan and the three-year medium-term expenditure framework, sets resource and spending ceilings with the Finance Ministry, and keeps the national project bank.913

Federal
Financial Comptroller General Office

Keeps government accounts and prepares the consolidated financial statements of the federal, provincial and local governments, the source of most actual-spending figures.9261

Federal
Public Debt Management Office

Projects borrowing needs, issues domestic debt securities, records and repays foreign loans, manages government guarantees and publishes debt data.10

Provincial
Provincial governments and assemblies

Make their own budgets and levy provincial taxes (such as vehicle and entertainment tax); receive federal grants and a share of VAT and excise; spent Rs 198.8 billion in 2081/82. They may borrow domestically only within the recommended limit and with federal consent.781910

Local
Local governments (municipalities and rural municipalities)

Make their own budgets, levy property, house rent, business and other local taxes, and receive the largest conditional grants from the federal budget (Rs 206.08 billion planned for 2083/84); spent Rs 437.4 billion in 2081/82.81619

Independent body
Auditor General

Constitutional body that audits the accounts of all federal and provincial offices and local levels for regularity, economy, efficiency, effectiveness and propriety, and reports yearly on irregularities, revenue, debt and budget execution.3222

Independent body
National Natural Resources and Fiscal Commission

Constitutional body that recommends how revenue is distributed, the equalisation grants to provinces and local governments, the basis for conditional grants, and the ceiling on domestic borrowing for all three levels. For 2083/84 it recommended equalisation grants made up of minimum, formula-based and performance-based parts (Rs 2.46 billion for provinces and Rs 3.61 billion for local governments by performance). For 2083/84 it also recommended a domestic borrowing ceiling of 5.5 per cent of estimated GDP for the federal government and 12 per cent of revenue-sharing receipts plus own-source revenue for provinces and local governments. These are recommendations; the budget sets the final amounts.123311

Question 7

What have parties and leaders said and done?

What was said or promised is shown apart from what was recorded as done. Every entry needs a dated source. A missing entry means the position is not established, not that someone opposes or is neutral.

Party positions on taxation and public spending are still being researched. To keep coverage fair, they will be added for every party with seats in the House of Representatives at the same time, each from that party's own documents. The records above are government budget allocations, announcements and dated outcomes; they do not represent any party.

Said or promised

Stated position · 2026 (budget speech for FY 2026/27)

Government of Nepal (Ministry of Finance)

Announced in the 2026/27 budget: personal income tax threshold doubled to Rs 1 million and the top rate cut by ten percentage points; customs cut on 273 raw-material items and customs tiers reduced from eleven to seven; excise abolished on 360 items; a 10 per cent VAT discount for digital payment; a committee to study multiple VAT rates; and settlement of pending tax disputes on payment of an extra 1 per cent of the assessed tax.29

Recorded actions and outcomes

Funding decision · 2026 (budget speech for FY 2026/27)

Government of Nepal (Ministry of Finance)

The 2026/27 (2083/84) budget allocates Rs 2,124.34 billion: Rs 1,270.58 billion current (59.8 per cent, including transfers to provinces and local levels), Rs 431.10 billion capital (20.3 per cent) and Rs 422.64 billion financing (19.9 per cent). It is financed by Rs 1,405.31 billion revenue, Rs 61.74 billion foreign grants, Rs 247.28 billion foreign loans and Rs 410 billion domestic borrowing.16

Funding decision · 2026 (budget speech for FY 2026/27)

Government of Nepal (Ministry of Finance)

Fiscal transfers planned for 2026/27: equalisation grants of Rs 61.50 billion to provinces and Rs 90.20 billion to local levels (stated as following the Commission's recommendations); conditional grants of Rs 39.72 billion and Rs 206.08 billion; complementary grants of Rs 4.60 billion and Rs 8.93 billion; special grants of Rs 3.82 billion and Rs 9.40 billion; and about Rs 175 billion through revenue sharing.16

Outcome · FY 2081/82, reported in the Auditor General's 63rd report (2083)

Government of Nepal

FY 2081/82 (2024/25) outturn as audited: Rs 1,513.25 billion spent of an original Rs 1,860.30 billion budget (81.34 per cent); 63.57 per cent of the capital budget spent; revenue Rs 1,196.19 billion, 84.28 per cent of target.5

Outcome · Mid-March 2026 (Economic Survey 2025/26)

Public Debt Management Office

Outstanding public debt of Rs 2,878.30 billion (43.6 per cent of GDP) as of mid-March 2026; debt service of Rs 242.83 billion in the first eight months of 2025/26, 26.2 per cent of federal spending.20

Question 8

What would progress look like, and when do we check again?

IndicatorLatest official figureOfficial targetRevisit
Share of the federal capital budget actually spent5 63.57 per cent of the original capital allocation (FY 2081/82)5 No official target found On publication of the Auditor General's 64th annual report (covering FY 2082/83)
Outstanding public debt as a share of GDP2013 43.13 per cent (mid-July 2025); 43.6 per cent by mid-March 2026 (Mid-July 2025)202 39.0 per cent (16th Plan) (FY 2085/86)13 2027-06 (Economic Survey 2026/27)
Revenue collected by the federal government (before sharing with provinces and local levels) as a share of GDP513 19.30 per cent (Finance Ministry figure reported by the Auditor General); federal revenue after sharing was 16.65 per cent (FY 2081/82)52 23.5 per cent (16th Plan indicator table; the plan's text gives 21.4 per cent) (FY 2085/86)13 2027-06 (Economic Survey 2026/27)
Debt service (principal and interest) as a share of federal expenditure20 23.9 per cent (26.2 per cent in the first eight months of FY 2082/83) (FY 2081/82)20 No official target found 2027-06 (Economic Survey 2026/27)
Revenue collected against the annual budget estimate515 Rs 1,196.19 billion, 84.28 per cent of the Rs 1,419.30 billion target (FY 2081/82)5 Rs 1,580.32 billion revenue (budget estimate, including revenue shared with provinces and local levels) (FY 2083/84)15 2027-08 (after FY 2083/84 closes in mid-July 2027)

Sources

Grouped by type of evidence. Government plans show what government intends; they are not proof of results. Party material shows what a party says.

Constitution & law

  1. The Constitution of Nepal (English translation, incl. first and second amendments) — Nepal Law Commission, Government of Nepal, Gazette publication 20 September 2015; amended 2016 and 2020. Part 10, Articles 115–118, pp. 63–64; Article 119, pp. 64–65; Articles 120–123, pp. 65–66; Articles 124–125, p. 66. Checked 2026-10-10
  2. The Constitution of Nepal (English translation, incl. first and second amendments) — Nepal Law Commission, Government of Nepal, Gazette publication 20 September 2015; amended 2016 and 2020. Part 5, Article 59 (exercise of financial powers), pp. 35–36; Article 60 (distribution of sources of revenue), pp. 36–37. Checked 2026-10-10
  3. The Constitution of Nepal (English translation, incl. first and second amendments) — Nepal Law Commission, Government of Nepal, Gazette publication 20 September 2015; amended 2016 and 2020. Schedule 5 item 9, p. 193; Schedule 6 item 4, p. 196; Schedule 8 item 4, p. 200. Checked 2026-10-10
  4. आर्थिक कार्यविधि तथा वित्तीय उत्तरदायित्व ऐन, २०७६ (Financial Procedures and Fiscal Responsibility Act, 2076), consolidated text incl. first amendment 2081 — Nepal Law Commission, Government of Nepal, Authenticated 2076-06-24 BS; first amendment 2081-12-18 BS. Section 5(5)–(6) (consolidated financial statement by the Financial Comptroller General Office), section 6 (medium-term expenditure framework) and section 7(1) (resource and spending ceilings), p. 8; section 10(3), p. 12; section 15(2)–(3), p. 15; section 17 (project bank), p. 15; section 20(2)–(3) (virement), p. 17; section 50 (fiscal accountability), p. 35. Searched the full text for numerical (percentage) ceilings: none on deficit or debt.. Checked 2026-10-10
  5. सार्वजनिक ऋण व्यवस्थापन ऐन, २०७९ (Public Debt Management Act, 2079) — Nepal Law Commission, Government of Nepal, Authenticated 2079-06-23 BS (Act no. 28 of 2079). Sections 3–4, pp. 2–3; section 5(2) (foreign loan cap of one-third of previous year's GDP at current prices), p. 3; section 6(1), p. 4; section 20, p. 10. Checked 2026-10-10
  6. The Constitution of Nepal (English translation, incl. first and second amendments) — Nepal Law Commission, Government of Nepal, Gazette publication 20 September 2015; amended 2016 and 2020. Article 250, p. 141; Article 251(1)(a)–(i), pp. 142–143. Checked 2026-10-10
  7. The Constitution of Nepal (English translation, incl. first and second amendments) — Nepal Law Commission, Government of Nepal, Gazette publication 20 September 2015; amended 2016 and 2020. Article 240, p. 125; Article 241 (functions of the Auditor General), pp. 126–127; Article 294 (annual reports of constitutional bodies), p. 172. Checked 2026-10-10

Government plans & policy

  1. व्यय अनुमानको विवरण (रातो किताब) आ.व. २०८३/८४ (Statement of Expenditure Estimates — Red Book, FY 2083/84) — Ministry of Finance, Government of Nepal, 2083 BS / 2026. Expenditure estimate summary, PDF p. 5 (current, transfers, capital, financing by level and source) and PDF p. 7 (2081/82 actual, 2082/83 revised, 2083/84 estimate by source: revenue, domestic loan, foreign grant, foreign loan; Rs lakh). Checked 2026-10-10
  2. आर्थिक वर्ष २०८३/८४ का लागि सङ्घ, प्रदेश र स्थानीय सरकारले लिन सक्ने आन्तरिक ऋणको सीमा सम्बन्धमा नेपाल सरकार, प्रदेश सरकार र स्थानीय सरकारलाई गरिएको सिफारिस (Recommendation on the internal borrowing ceiling for federal, provincial and local governments, FY 2083/84) — National Natural Resources and Fiscal Commission, Recommendation dated 2082-11-27 BS. Section ख (constitutional and legal basis, incl. Constitution Article 251(1)(च) and Public Debt Management Act s. 6(1)), PDF p. 1; section घ (ceilings for 2083/84: federal 5.5% of estimated GDP; provincial and local 12% of revenue sharing plus own-source revenue, with Government of Nepal approval), PDF p. 9; section ङ(ङ) (use of internal loans; not for current or administrative spending), PDF p. 10. Checked 2026-10-10
  3. सोह्रौँ योजना (आ.व. २०८१/८२–२०८५/८६) (The Sixteenth Plan) — National Planning Commission, Government of Nepal, 2081 BS / 2024. Section 2.6.2 (government finance), pp. 59–60; Table 2.8 (public finance projections, Rs crore), p. 61; text and Table 2.9 (fiscal impact indicators), p. 62. Checked 2026-10-10
  4. Budget Speech for Fiscal Year 2026/27 (2083/84) — English (unofficial translation) — Ministry of Finance, Government of Nepal, 2026. Paragraphs 8–9 (restructuring, austerity, about NPR 20 billion savings), printed p. 4; paragraph 11 (capital expenditure reforms), printed p. 6. Checked 2026-10-10
  5. आर्थिक वर्ष २०८३/८४ को बजेट वक्तव्य, अनुसूची १: आय व्ययको विवरण (Budget speech FY 2083/84, Annex 1: statement of income and expenditure) — Ministry of Finance, Government of Nepal, 2083 BS / 2026. Annex 1 (अनुसूची-१), PDF p. 52; columns: 2081/82 actual, 2082/83 revised estimate, 2083/84 estimate (Rs lakh). Rows 1–2 (revenue, tax), 9–12 (expenditure, current, capital, fiscal transfer), 13 (budget deficit), 21–25 (borrowing and repayment), 28 (total expenditure). Checked 2026-10-10
  6. Budget Speech for Fiscal Year 2026/27 (2083/84) — English (unofficial translation) — Ministry of Finance, Government of Nepal, 2026. Paragraph 64 (expenditure estimate), paragraph 65 (financing), printed p. 42; paragraph 66 (fiscal transfers), printed pp. 42–43. Checked 2026-10-10
  7. आर्थिक वर्ष २०८३/८४ को बजेट वक्तव्य, अनुसूची २: राजस्व प्राप्तिको अनुमान (Budget speech FY 2083/84, Annex 2: revenue estimates) — Ministry of Finance, Government of Nepal, 2083 BS / 2026. Annex 2 (अनुसूची-२), PDF pp. 53–55 (Rs lakh): income/profit/capital gains tax, excise, VAT rows p. 53; customs and import taxes p. 54. Checked 2026-10-10
  8. Budget Speech for Fiscal Year 2026/27 (2083/84) — English (unofficial translation) — Ministry of Finance, Government of Nepal, 2026. Paragraphs 67–73 (revenue policies: incentives, base broadening, administration, customs, exemptions), printed pp. 43–47. Checked 2026-10-10
  9. Budget Speech for Fiscal Year 2026/27 (2083/84) — English (unofficial translation) — Ministry of Finance, Government of Nepal, 2026. Paragraph 7(a)–(i), printed pp. 3–4. Checked 2026-10-10
  10. Budget Speech for Fiscal Year 2026/27 (2083/84) — English (unofficial translation) — Ministry of Finance, Government of Nepal, 2026. Paragraph 63 (fiscal federalism; double taxation), printed p. 42. Checked 2026-10-10
  11. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Paragraphs 2.2–2.5 (PFM reform strategy, Standards Relating to Source Assurance for Multi-year Projects 2025, IPFMS), pp. 26–27. Checked 2026-10-10
  12. आर्थिक वर्ष २०८३/८४ मा सङ्घीय सञ्चित कोषबाट प्रदेश र स्थानीय सरकारमा हस्तान्तरण हुने वित्तीय समानीकरण अनुदान सम्बन्धमा नेपाल सरकारलाई गरिएको सिफारिस (Recommendation on fiscal equalisation grants, FY 2083/84) — National Natural Resources and Fiscal Commission, Recommendation dated 2082-11-29 BS. Section 2(घ): minimum grant to provinces Rs 15.3758 billion (25%), p. 3; minimum grant to local governments Rs 30.83 billion (34.18%), p. 4; performance-based grants (4%) Rs 2.4602 billion provinces and Rs 3.6069 billion local, pp. 8–9. Checked 2026-10-10

Official data

  1. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Chapter 2, paragraphs 2.6–2.7, p. 27. Checked 2026-10-10
  2. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Chapter 2, paragraph 2.33, p. 37; Table 2(k) and paragraphs 2.34–2.35, p. 38; paragraphs 2.36–2.40, p. 39. Checked 2026-10-10
  3. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Paragraph 2.41, p. 40; paragraph 2.53 and Table 2(q), pp. 43–44; Table 2(r) and paragraph 2.56, p. 44. Checked 2026-10-10
  4. महालेखापरीक्षकको त्रिसट्ठीऔँ वार्षिक प्रतिवेदन, सारांश-२०८३ (Auditor General's 63rd Annual Report, Summary 2083) — Office of the Auditor General, Nepal, 2083 BS / 2026. Chapter 3, federal ministries: para 2 (macro indicators vs 16th Plan targets), pp. 15–16; para 3 (revenue target and collection), p. 16; para 4 (revenue exemptions), pp. 16–17; para 5 (arrears), p. 17; para 6 (budget and spending, capital 63.57%, quarterly shares), p. 17; para 7 (spending by source, incl. Rs 253.92 bn from domestic loans; debt used for current spending), pp. 17–18; para 8 (budget ceilings vs actual), p. 18; para 9 (virement), p. 18; para 10 (cash plan, idle transfers, extra interest), pp. 18–19. Checked 2026-10-10
  5. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Chapter 13: paragraph 13.11, p. 192; Table 13(b), p. 193; Schedule 13(d) and paragraph 13.15, p. 194; paragraphs 13.17–13.18, p. 195; paragraph 13.21, p. 196; paragraph 13.24, p. 197. Checked 2026-10-10
  6. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Paragraphs 2.62–2.66, p. 47; Table 2(v) (source: Public Debt Management Office) and note on data discrepancies, p. 48; paragraph 2.68, p. 49. Checked 2026-10-10
  7. महालेखापरीक्षकको त्रिसट्ठीऔँ वार्षिक प्रतिवेदन, सारांश-२०८३ (Auditor General's 63rd Annual Report, Summary 2083) — Office of the Auditor General, Nepal, 2083 BS / 2026. Chapter 1, paragraph 13 (public debt per PDMO annual report 2081/82), printed p. 8. Checked 2026-10-10
  8. महालेखापरीक्षकको त्रिसट्ठीऔँ वार्षिक प्रतिवेदन, सारांश-२०८३ (Auditor General's 63rd Annual Report, Summary 2083) — Office of the Auditor General, Nepal, 2083 BS / 2026. Foreword (प्राक्कथन), PDF p. 7; Chapter 2, paragraphs 2–3, printed pp. 9–10. Checked 2026-10-10
  9. Economic Survey 2025/26 (English) — Ministry of Finance, Government of Nepal, 2026. Paragraph 2.59 and Table 2(u), pp. 45–46. Checked 2026-10-10
  10. Economic Survey 2025/26 (English), Statistical Annex 2.28: Budget of Federal, Province and Local Level — Ministry of Finance, Government of Nepal, 2026. Annex 2.28, annex p. 46 (PDF p. 321); federal capital budget 2024/25 = 35235.00, 2025/26 = 40916.98. Checked 2026-10-10
  11. एकीकृत वित्तीय विवरण आ.व. २०८१/८२ (Consolidated Financial Statement, FY 2081/82) — Financial Comptroller General Office, Government of Nepal, 2082/83 BS. Whole document (591 pp.) opened to confirm FCGO's role and the existence of the statement; no figures on this page are taken from it directly.. Checked 2026-10-10

Independent research

  1. Nepal's Growth Expected to Slow in FY26 Amid Political Transition (press release for Nepal Development Update: Reforms to Accelerate Public Investment) — World Bank, 13 November 2025. Paragraphs on public investment (capital spending 7.9% of GDP in FY24; 10–15% needed; recommended reforms). Checked 2026-10-10
  2. Press Release No. 26/188: IMF Executive Board concludes 2026 Article IV consultation with Nepal and completes seventh review under the ECF — International Monetary Fund, 8 June 2026. Executive Board assessment and staff recommendations (fiscal policy, capital expenditure execution, tax expenditures, budget realism). Checked 2026-10-10

News reports

  1. Nepal's development spending short of even half of annual allocation (Yagya Banjade) — The Kathmandu Post, 17 July 2026. Whole article (FY 2025/26 capital allocation, mid-term revision, spending to 15 July). Checked 2026-10-10

Corrections & right of reply

Parties, leaders and readers may ask us to correct an error or add a documented response. Corrections are published visibly with the date and reason; no one can pay to change coverage.

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Change history
  1. 2026-10-09 — First researched draft of the taxation and public spending issue page (status: review). (New topic page for the National Agenda; all figures taken from sources opened on 2026-10-09. Budget estimates, revised estimates and actuals are labelled separately; conflicting official figures are shown side by side. Party positions intentionally not included pending all-party research.)
  2. 2026-10-10 — Article 59: removed "Only" from "Only the Government of Nepal may obtain foreign assistance and borrow" (en and ne). (Article 59(6) (Law Commission translation, p. 36) gives the Government of Nepal the power to obtain foreign assistance and borrow loans but does not say "only"; provinces and local levels may borrow domestically under PDMA s. 6(1).)
  3. 2026-10-10 — Budget annex capital estimate for 2083/84 corrected from Rs 431.10 bn to Rs 431.11 bn in the annex-based item, with the speech figure (431.10) noted. (Annex 1 row 11 reads 4,31,10,63 lakh = Rs 431.11 bn; 431.10 is the speech's rounded figure (para 64).)
  4. 2026-10-10 — 16th Plan revenue target: the classification rationale and the "Current plan" law/policy item now say the 23.5% target is from the indicator table and that the Plan's text gives 21.4%. (Both figures appear on printed p. 62 (text and Table 2.9); the target was previously shown without the note outside the indicator and uncertain sections.)
  5. 2026-10-10 — Budget law/policy item: sunset law quoted as "within the current fiscal year"; Rs 20 bn savings attributed to the package of austerity measures, not only to office running-cost cuts. (Budget speech paras 9 and 11 (printed pp. 4 and 6).)
  6. 2026-10-10 — 2082/83 preliminary figures (uncertain): relabelled as reported and preliminary; "citing Finance Ministry data" changed to "citing government data"; 46.79% now described as a share of the annual target; FCGO check recorded; FCGO source added to cites. (The Kathmandu Post article (17 July 2026) attributes the figures to "government data" (its chart credits the Ministry of Finance) and calls 46.79% a share of the "annual target". The FCGO consolidated-statement page, checked 2026-10-10, lists 2081/82 as the latest year, so no official 2082/83 figures are available.)
  7. 2026-10-10 — Borrowing conflict (uncertain): added the Auditor General's source-of-spending figure of Rs 253.92 bn from domestic loans for 2081/82. (OAG 63rd report summary, ch. 3 para 7 (printed p. 17), gives a third official figure alongside 329.08 and 234.55; it is disclosed, not reconciled.)
  8. 2026-10-10 — Added the National Natural Resources and Fiscal Commission's 2083/84 internal borrowing ceiling recommendation (federal 5.5% of estimated GDP; provinces and local governments 12% of revenue-sharing receipts plus own-source revenue) to law_policy, the fiscal-rules option and the Commission's responsibility entry; new source nnrfc-internal-loan-2083-84. (Editorial decision. Verified in the Commission's recommendation dated 2082-11-27 (PDF p. 9), made under Constitution Article 251(1)(f) (verified, p. 143). Labelled as a recommendation: the 2026/27 budget speech does not refer to it, and no reviewed source shows adoption or compliance.)
  9. 2026-10-10 — Options: added distributional trade-offs to the tax-mix option (who gains from income tax cuts; who bears consumption versus income/property taxes) and the fiscal-rules option (current versus future taxpayers). (Balance review: each side's distributional costs are now stated.)
  10. 2026-10-10 — Wording: "proven capacity" changed to "capacity ... shown so far" (combinations). (Neutral wording.)
  11. 2026-10-10 — Nepali: बैङ्क changed to बैंक throughout. (House style.)
  12. 2026-10-10 — Locators: FPFR Act s. 5(5)–(6) and s. 7(1) added (support the FCGO and NPC roles); OAG para 7 locator notes Rs 253.92 bn; Annex 1 note records 431.11 vs 431.10. All accessed dates set to 2026-10-10 after re-opening. (Independent verification (version 2): every source was re-downloaded and checked at the stated locator.)
  13. 2026-10-10 — Published after independent source-by-source verification. Party positions not yet included (to be added for all House parties together). Nepali text awaiting native review. (Editorial decisions: Budget estimates, revised estimates and actuals labelled separately; conflicting official borrowing and deficit figures disclosed, not reconciled; NNRFC borrowing ceiling shown as the Commission’s recommendation under Art. 251(1)(f), not adopted policy; 2082/83 news figures kept only as preliminary until FCGO publishes year-end accounts.)