Nepal’s Fiscal Dynamics Reflect Gradual Recovery: Revenue and Expenditure Growth Trends

Nepal’s fiscal indicators over the past six years reveal a fluctuating trajectory in both revenue and expenditure growth, reflecting the country’s economic resilience amid domestic and global disruptions. According to recent data up to mid-May 2025, revenue growth has regained strong momentum while expenditure growth is stabilizing after a period of stagnation.

In the fiscal year 2019/20, Nepal’s revenue growth was marginal at 0.2%, primarily due to the economic fallout of the COVID-19 pandemic. However, the economy rebounded sharply in the subsequent two fiscal years, with revenue growth accelerating to 16.0% in 2020/21 and 14.1% in 2021/22. This rebound was driven by increased tax collection, post-COVID economic revival, and improved government mobilization of resources.

However, in 2022/23, revenue growth took a significant hit, declining by 9.3%. This slump reflected weak consumption, reduced imports (affecting customs revenue), and sluggish private sector activity. Fortunately, the fiscal year 2023/24 marked a reversal of this trend, with annual revenue growth rebounding to 7.1%. By mid-May 2024/25, the growth had further improved to 10.9%, indicating strong performance in the current fiscal year and increased fiscal space for government programs.

Expenditure growth followed a somewhat different path. The fiscal year 2019/20 recorded a contraction of -1.7%, likely due to austerity measures and COVID-induced administrative slowdown. With the revival in economic activity, expenditure growth jumped to 9.7% in 2020/21 and 9.5% in 2021/22. In 2022/23, it remained strong at 8.5%, reflecting sustained capital and recurrent spending.

Interestingly, the fiscal year 2023/24 saw a sharp dip in expenditure growth to -0.9% annually, reflecting tighter fiscal controls or delayed project disbursements. However, recent data suggests recovery, with expenditure growth climbing to 9.6% by mid-May 2024/25, signaling improved budget execution and spending acceleration.

This trend of improving revenue and recovering expenditure highlights a positive fiscal outlook for Nepal. While challenges remain in maintaining consistent growth and managing fiscal deficits, the current data points to a cautiously optimistic scenario for the remainder of the fiscal year.