Revenue Collection Shows Modest Growth but Falls Short of Target as Government Spending Remains Weak

Kathmandu — Nepal’s revenue collection has shown a modest increase during the first eight months of the current fiscal year, but the government is still struggling to meet its ambitious targets. According to the Ministry of Finance, the government collected Rs 747.28 billion in revenue by the end of Falgun, representing about 82 percent of the target set for the period.

Official data released by the ministry shows that revenue collection during the review period of fiscal year 2025/26 (2082/83) reached Rs 747.28 billion, slightly higher than the Rs 720.24 billion collected during the same period last fiscal year. The increase represents a 3.75 percent year-on-year growth, indicating gradual improvement in revenue performance despite persistent economic challenges.

In the month of Falgun alone, the government collected Rs 82.25 billion in revenue. However, the collection still falls significantly short of the government’s eight-month target of Rs 910.20 billion, highlighting the gap between fiscal expectations and actual economic activity.

A closer look at the composition of revenue reveals a mixed trend across major tax categories. Customs revenue, one of the government’s key income sources, remained below target. The government had aimed to collect Rs 195.90 billion from customs duties by the end of Falgun, but actual collection stood at Rs 144.50 billion, achieving only 73.76 percent of the target. Nevertheless, customs revenue has increased by 8.12 percent compared to the same period last year, suggesting a gradual recovery in import activity.

Similarly, Value Added Tax (VAT) collection also recorded growth. The government had targeted Rs 246.43 billion from VAT, of which Rs 225.53 billion has been collected so far. This figure represents a 7.35 percent increase compared to the previous fiscal year. The rise in VAT revenue is often considered an indicator of improved domestic consumption and economic transactions.

Revenue from excise duties also improved during the period. Collection reached Rs 120.36 billion, marking a 10.44 percent increase from last year’s Rs 108.87 billion. The growth in excise revenue is mainly attributed to increased consumption of goods such as tobacco, alcohol and other excisable products.

However, not all revenue streams performed positively. Income tax collection declined slightly, falling by 1.42 percent compared to the previous year. Revenue from income tax stood at Rs 170.80 billion, down from Rs 173.26 billion collected during the same period last fiscal year. The decline reflects ongoing challenges in business profitability and formal sector income growth.

A more noticeable drop was recorded in non-tax revenue, which fell by 13.31 percent to Rs 70.69 billion. Non-tax revenue typically includes government service fees, dividends from state-owned enterprises and other administrative income sources. The decline suggests weaker contributions from these areas during the review period.

From an institutional perspective, the Department of Customs collected Rs 319.94 billion, achieving roughly 79 percent of its target, while the Inland Revenue Department collected Rs 356.63 billion, representing about 81 percent of its target. Both agencies remain slightly behind their expected performance levels.

Government expenditure data also indicates a slow pace of spending, particularly in development projects. According to the Financial Comptroller General Office, capital expenditure had reached only about 19 percent of the annual allocation by the end of Falgun. This suggests that infrastructure and development activities have progressed at a much slower pace than anticipated.

The government had introduced a Rs 1.964 trillion national budget for the current fiscal year. By the end of Falgun, total government spending stood at Rs 926 billion, accounting for 47.18 percent of the total budget allocation. While recurrent expenditures such as salaries, allowances and administrative costs continue steadily, development spending remains significantly behind schedule.

Capital expenditure, which is considered a key driver of economic growth, appears particularly weak. Out of the Rs 407 billion allocated for development projects, only 19.24 percent had been spent by the end of the eight-month period. The slow progress in capital spending has raised concerns among economists about delays in infrastructure development and public investment.

Economists say the combination of below-target revenue collection and sluggish development spending reflects broader structural weaknesses in the economy. Limited private sector activity, cautious investment sentiment and slow project implementation have all contributed to the current fiscal situation.

Analysts warn that if the pace of development spending does not accelerate in the remaining months of the fiscal year, the government may struggle to stimulate economic growth and generate additional revenue. Strengthening revenue administration, boosting domestic economic activity and improving project execution are seen as crucial steps to maintain fiscal stability and support Nepal’s broader economic recovery.