The Government of Nepal recently unveiled a record-breaking budget of Rs 2,124.34 billion (Rs 21.24 kharba) for the fiscal year 2026/27 (2083/84). Positioned as a comprehensive economic reset following recent political shifts, this ambitious financial plan targets an economic growth rate of 7% while keeping inflation capped at 6%. The total size of the budget is approximately 25.2% larger than the revised estimates of the current fiscal year, shifting focus toward technology, infrastructure, and private-sector growth.
In terms of allocation, the largest portion—Rs 1,270.58 billion (nearly 60%)—is dedicated to recurrent expenditure. Capital expenditure, which drives physical development, is set at Rs 431.10 billion, while financial management for debt repayment accounts for Rs 422.64 billion. To fund this, the government aims to mobilize Rs 1,405.31 billion through tax and non-tax revenues and secure Rs 61.74 billion in foreign grants. The remaining deficit will be financed through Rs 410 billion in domestic borrowing and Rs 247.28 billion in foreign loans.
Significant tax reforms are a major highlight of this budget, offering substantial relief to citizens and businesses. The personal income tax exemption threshold has been doubled to Rs 1 million per year, and the top marginal rate for personal income tax has been reduced by 10 percentage points. For the business sector, customs duties on 273 categories of industrial raw materials have been reduced to boost domestic manufacturing, and excise duties have been entirely abolished on 360 categories of goods.
The budget heavily prioritizes innovation, the digital economy, and startups. A standout initiative is the planned establishment of the country’s first sovereign AI compute center, developed in collaboration with the private sector. Additionally, to foster entrepreneurship, startups with an annual turnover of up to Rs 10 crore will receive a full income tax exemption for five years. The government is also offering a 50% tax exemption on income earned from exports, which directly benefits the growing IT and software services sector.
On the infrastructure and administrative fronts, the government plans to add an additional 1,040 MW of electricity to the national grid within a year and restructure the Nepal Electricity Authority into three separate entities. To streamline bureaucracy and cut costs, 31 government bodies will be abolished and others merged. The budget also sets strong social goals, aiming to bring 90% of the population under health insurance coverage within three years and formally announcing a ‘Visit Nepal Year’ for 2085 BS.
