The government's budget has been increasing every year. However, the question of how much economic return that spending has generated is becoming increasingly serious. Data from the past decade suggest that while Nepal’s budget size has expanded rapidly, its economic returns have gradually weakened.
Meanwhile, Finance Minister Dr Swarnim Wagle has unveiled a budget of Rs 2124 billion for the fiscal year 2026-27. Speaking during Nepal Khabar’s live budget discussion program, economist Dr Resham Thapa described the budget as both ambitious and confused.
According to Dr Thapa, the budget lacks a clear theoretical foundation. “On one hand, the government says it will build houses itself in Mechi; and on the other, it says government-owned pharma will produce 25 types of medicines, while simultaneously claiming it will boost private sector confidence. “This reflects a weak economic and theoretical grounding,” he said.
In fiscal year 2013-14, when the budget stood at Rs 517 billion, Nepal’s economic growth rate was 5.1 percent. At that time, the ‘Budget Efficiency Ratio’ stood at 0.00986. In other words, every additional billion rupees of government spending was generating comparatively higher economic growth.
However, by fiscal year 2025-26, the budget had nearly quadrupled to Rs 1964 billion, while economic growth is projected to remain limited to less than 4 percent. During the same period, the efficiency ratio declined to 0.00204. The data indicate a trend of declining economic efficiency alongside budget expansion.
“This demonstrates that a larger budget does not automatically produce larger economic outcomes,” Dr Thapa said. “Moreover, the finance minister has introduced a budget equivalent to about 32 percent of the economy, making it large and ambitious in terms of size.”
Capital expenditure on infrastructure, energy, irrigation, industrial development, and productive sectors is generally regarded as generating long-term economic returns. However, Nepal has consistently struggled with the effective implementation of capital spending. Dr Thapa argues that the budget for fiscal year 2026-27 has allocated an insufficient amount for capital expenditure.
He further noted that the near-equal allocation between capital expenditure and financial management indicates a lack of boldness on the part of the finance minister.
“While the overall budget size continues to increase, the fact that capital expenditure and financial management allocations are almost equal has pushed the debate over the quality of spending into the background,” he said.
Dr Thapa also argued that the budget is unlikely to increase production, employment, or private sector investment. According to him, the government’s plan to raise Rs 410 billion in domestic borrowing could crowd out private sector expansion.
In addition, he warned that the budget contains no clear strategy for controlling inflation under 6 percent despite targeting 7 percent economic growth. As a result, ordinary citizens may face rising prices after the budget’s implementation. “On top of that salary hike of government employee will also fuel the inflation.”
“In focusing solely on economic growth, the government has overlooked inflation management, he said, adding, “Keeping inflation within 6 percent will be difficult due to both domestic and external factors.”
Dr Thapa further argued that although the current government emerged with a strong majority following a significant political shift and popular movement, it has failed to introduce a corresponding policy departure.
“In other words, while the government represents a political departure, it has not been able to achieve a policy departure,” he said. “The finance minister appears trapped in structural contradictions, including overly ambitious revenue targets and maintaining nearly equal allocations for development expenditure and financial management.”
Watch Nepalkhabar Budget Sambad video with economist Dr Resham Thapa:
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