On Jestha 15, 2083 BS (May 29, 2026), for the fiscal year 2083/84, Finance Minister Dr. Swarnim Wagle presented Nepal's national budget amounting to Rs. 21.24 Kharba (Rs. 2.124 trillion) at a joint session of the Federal Parliament. Marking the first budget of the Rastriya Swatantra Party-led government under Prime Minister Balendra Shah, it is also the largest budget in Nepal's history and one of the most ambitious in terms of reform. 

Expenditure Breakdown

Recurrent Expenditure

• Rs 1.27 trillion (59.8%)
• Covers salaries, debt interest, and operations

Capital Expenditure

• Rs 431.1 billion (20.3%)
• For infrastructure, roads, and buildings

Financial Management

• Rs 422.64 billion (19.9%)
• Debt repayment and lending

Sources of Funding

• Revenue Collection: Rs 1.405 trillion
• Foreign Grants: Rs 61.74 billion
• Foreign Loans: Rs 247.28 billion
• Domestic Borrowing: Rs 410 billion
• Fiscal Deficit: Rs 657.29 billion (to be covered by borrowing)

Sector-wise Budget Breakdown

Economic Reform and Inflation Targets

• The budget sets an economic growth target of 7%; looking at the current year’s target of 3.85%, the government is setting a nearly double target.
• The government targets to limit consumer price inflation below 6% using a combination of tight supply-side coordination and monetary policy assistance.

Tax Reforms and Relief Measures

• The income tax exemption threshold has doubled to Rs 10 Lakhs, which means we don't need to pay income tax if we earn up to Rs 1 million per year.
• An instant 10% VAT Refund will be provided at the billing point for customers making digital payments.
• A VAT bill lottery system has been introduced to encourage people to demand receipts and reduce the informal economy.
• For businesses and traders, the 11-tier customs duty system has been reduced to 7-tiers, reducing raw material duties to encourage domestic manufacturing.
• Excise duties have been entirely abolished on 360 categories of goods, cutting production costs.
• Customs duties on 273 categories of industrial raw materials were reduced, enabling local manufacturers to produce goods more cheaply.
• A new Green Tax consolidates previous road maintenance and infrastructure development levies into one unified charge.

Education Sector Plans

Education was allocated Rs 218.3 billion, remaining one of the government’s top priorities.

• Audit of school infrastructure across the country.
• Increased quotas for medical education.
• Plans to invite international university campuses to Nepal.
• An Open University to serve Nepali students living abroad (non-resident Nepalis).
• Residential schools for students in communities with low Human Development Index (HDI) scores.
• School teachers, as civil servants, will also benefit from the 21% effective salary increase.
• Rs 8.6 billion for student scholarships.

Health Sector Plans

The health sector was allocated a total budget of Rs 101.95 billion.

• Target to bring 90% of the population under health insurance within 3 years, allocating 15 billion for health insurance programs.
• Free treatment for childhood cancer at government hospitals.
• 336 basic health facilities (hospitals) to be built or upgraded within 3 years.
• Establishment of a National Food and Drug Administration to improve the safety standards.
• Nursing night duty allowance doubled, to improve working conditions and attract healthcare workers.
• Disability rehabilitation centers to be established in all provinces.
• Residential schools for children with autism.

Infrastructure and Development Projects

Total roads and urban infrastructure allocation was Rs 286.48 billion, being the highest of any single ministry at Rs 302.83 billion for the Ministry of Infrastructure Development.

• Around 1,000 km of roads to be blacktopped.
• Construction of 275 new bridges.
• Continued work on the Kathmandu-Tarai Fast Track, allocating Rs 17.64 billion.
• East-West Highway 4-lane upgrade: Rs 37.46 billion allocated.
• Nagdhunga Tunnel inauguration (connecting Kathmandu to the west).
• Introduction of electric buses for public transport.
• New irrigation for 15,800 additional hectares of farmland.
• Underground irrigation infrastructure allocated Rs 1.83 billion.
• Expansion and upgrading of major highways across the country.

Technology and Digital Transformation

• Establishment of Nepal's first AI Computing Centre in Syuchatar, Kathmandu, making it the country's first government-owned artificial intelligence infrastructure.
• 50% tax exemption on IT service exports to attract tech companies and encourage software exports.
• Partial privatization of Nepal Telecom (selling 34% of shares) to fund a national Tech Hub.
• Remote work legalized and formalized; remote workers can now register and pay taxes officially.
• Rs. 500 million allocated for startup promotion through the Nepal Enterprise Facility.
• Expansion of digital government services through the Nagarik App.
• Plans to develop Nepal as a regional data centre hub.
• Centralized software procurement across government agencies to reduce duplication and costs.

Employment and Private Sector Policies

A total of Rs 3.63 billion has been allocated to the labour and employment sector.

• Workers and employers will be mandatorily registered in a national labour registry.
• Written employment contracts, minimum wages, insurance, and bank-based salary payments will be made mandatory in all workplaces.
• Gig workers (freelancers, delivery riders, app-based workers) will be formally recognized and covered under social security.
• 31 government bodies to be dissolved and 6 others merged to cut waste and make governance leaner.
• A Governance Innovation Challenge Fund will reward provincial and local governments for innovative service delivery.
• Civil servant salary increase of 21% (10% base + 10% monthly performance incentive), taking effect from mid-July 2026.

Agriculture Sector

A total of Rs 46.92 billion has been allocated for agriculture and livestock development. 

• 40% capital subsidy for farmers who invest Rs 20 million or more.
• 80% subsidy on crop insurance premiums, where farmers can insure their crops at almost no cost.
• Rs 32.46 billion for fertilizer procurement.
• New agricultural bill to ensure fair market prices for farmers.
• Land banks to help consolidate and productively use fragmented farmland.

Energy and Tourism Plans

Energy (Rs 85.54 billion allocated)

• Target to add 1,040 MW of new electricity generation capacity: 670 MW from hydropower + 370 MW from solar.
• Acceleration of major projects: Upper Arun, Uttarganga, Chainpur Seti, Tamakoshi-5
• Construction of the Budhigandaki Hydropower Project to begin.
• Nepal Electricity Authority (NEA) to be restructured into three separate companies (generation, transmission, distribution).
• Rs 70 billion for new electricity transmission lines.

Tourism (Rs 7.34 billion allocated)

• Preparations for Visit Nepal Year 2029.
• Nepal Wellness Year 2027 declared rebranding Nepal as a wellness and yoga destination.
• Goal of getting Nepal removed from the EU Air Safety Blacklist, which currently prevents European carriers from flying here.
• Gautam Buddha International Airport (Bhairahawa) and Pokhara International Airport to be developed under Public-Private Partnerships (PPP).
• Development of new trekking routes to spread tourism beyond the traditional Everest and Annapurna trails.

What does this mean for ordinary citizens?

• The budget funds the expansion of “Blue Buses’’dedicated to safe public transport for women across major cities.
• Promises to ensure voting rights for Nepali citizens living abroad.
• Dalit children under 5 receive Rs 1,000/month in nutritional support (doubled from before).
• Doubled night-duty allowance for nurses.
• Electricity supply to improve with 1,040 MW of new capacity.
• Lower tax burden for many people earning up to Rs 1 million a year.
• Increased opportunities in technology, startups, and digital services.
• Potential job creation through private-sector growth and tourism development.
• Government workers and teachers get a 21% pay raise.

Challenges and Criticisms from Economists

1. The 7% growth target may be unrealistic, as Nepal's own statistics show growth at 3.85% this year, which requires a massive improvement in private investment, exports, and government spending efficiency, all within one year.

2. Capital spending has a historically poor track record. Nepal typically absorbs only 70–80% of its capital budget. Even if the government allocates Rs 431 billion for capital projects, past experience suggests a significant portion will remain unspent by year-end.

3. The fiscal deficit of Rs 657.29 billion raises debt sustainability concerns. Of the Rs 410 billion in domestic borrowing, Rs 246 billion must go toward repaying existing debt, meaning Nepal is effectively borrowing just to pay back what it already owes. 

4. A 5% VAT on electricity consumption above 50 units has been criticized for sending mixed signals: the government promotes electric vehicles and cooking, but then taxes higher electricity use.

5. Digital economy bias toward large players, while IT and AI initiatives are welcome, critics note the budget offers few targeted programmes for small software firms, freelancers, and startups. The focus on large data centres and sovereign computing may not address the day-to-day needs of Nepal's digital economy.

6. Nepal has a long history of well-written budgets that fail at execution. For over a decade, capital expenditure has regularly dropped below targeted rates, and in the final month of the fiscal year, low-quality spending is compressed.

Conclusion

The Budget for FY 2083/84 is one of  Nepal's most ambitious in recent years. The doubling of the income tax threshold, the simplification of customs, and the Sovereign AI Centre, healthcare expansions, represent much-needed reforms that past governments repeatedly deferred. The budget reform signals are considered by commentators to be the most serious since Nepal's economic liberalization in 1991. However, the gap between ambition and capacity remains Nepal's persistent challenge. If implemented effectively, the budget could support economic recovery and modernization. Whether this becomes a genuine turning point or another well-intentioned document will depend entirely on execution, something no budget speech, however bold, has ever been able to guarantee.