Revenue Collection Starts Firm, but Development Spending Remains Weak

The government has entered the new fiscal year with a sizeable inflow of revenue, but the pace of development spending remains weak, highlighting a familiar imbalance in Nepal’s budget implementation.

By the end of Shrawan, the first month of fiscal year 2083/84, the government had collected Rs 92.22 billion in revenue. This represents about 5.84 percent of the annual revenue target of Rs 1.58 trillion.

The revenue performance appears relatively stronger when compared with expenditure on development projects. Capital expenditure during the same period stood at only Rs 13.28 billion, despite an annual allocation of Rs 431.10 billion for capital spending.

A calculation based on the figures provided shows that Rs 13.28 billion is equivalent to around 3.08 percent of the annual capital budget, rather than 0.31 percent as stated in the original data. This discrepancy should be verified against the Financial Comptroller General Office before publication.

The revenue structure also shows that the government remains heavily dependent on taxes. Of the Rs 92.22 billion collected in the first month, Rs 85.19 billion came from tax revenue, accounting for more than 92 percent of total revenue collection.

The government has targeted Rs 1.40 trillion in tax revenue for the full fiscal year. By the end of Shrawan, around 6.07 percent of that target had been collected. Non-tax revenue reached Rs 7.03 billion, or around 3.97 percent of its annual target of Rs 177 billion.

Foreign grants, however, had not started flowing into government accounts by the end of the month. The government expects to receive Rs 61.74 billion in foreign grants during the fiscal year, but receipts under this heading remained zero in Shrawan.

Including revenue, grants and other receipts, total government receipts reached Rs 93.19 billion during the first month. This is around 5.68 percent of the annual receipts target of Rs 1.64 trillion.

The first-month figures suggest that revenue mobilisation has begun at a reasonable pace, but it is still below a simple one-twelfth benchmark of the annual target. If revenue were collected evenly throughout the year, about 8.33 percent of the target would be realised each month. Revenue collection, however, is seasonal, so the first-month performance alone cannot determine whether the annual target will be met.

The remaining challenge is nevertheless significant. After collecting Rs 92.22 billion in Shrawan, the government still needs to raise about Rs 1.49 trillion over the remaining 11 months. This would require average monthly revenue collection of roughly Rs 135 billion.

Meeting that target will depend heavily on the pace of imports, domestic consumption, business turnover and broader economic activity. Weak private investment or subdued demand could make revenue mobilisation increasingly difficult as the fiscal year progresses.

The more immediate concern lies on the expenditure side. Government capital spending has traditionally remained slow during the first half of the fiscal year before accelerating sharply toward the final months. The latest figures suggest that this pattern may persist unless project execution improves early in the year.

Low capital spending has wider economic consequences. Public investment in roads, irrigation, energy, buildings and other infrastructure directly generates demand for construction materials, transport, labour and related services. When such spending is delayed, its multiplier effect across the economy is also postponed.

This is particularly important at a time when liquidity in the banking system is relatively comfortable but private-sector credit demand remains subdued. In such circumstances, stronger public investment can help support aggregate demand and encourage private economic activity.

Delayed expenditure also creates risks for the quality of public investment. When a large share of the development budget is pushed toward the final months of the fiscal year, implementing agencies face pressure to spend quickly. That can weaken project supervision, reduce expenditure efficiency and increase the risk of poor-quality construction.

Several structural factors usually contribute to slow capital spending, including delays in procurement, contract awards, site clearance, land acquisition, environmental approvals and mobilisation of contractors. Unless these bottlenecks are addressed at the beginning of the fiscal year, simply increasing the size of the capital budget is unlikely to improve development outcomes.

The data therefore point to two different fiscal challenges. On the revenue side, the government must sustain and gradually accelerate collection to meet an ambitious annual target. On the expenditure side, it must ensure that collected resources are translated into productive public investment without waiting until the end of the fiscal year.

One further caution is necessary in interpreting the expenditure figures. The data provided state total expenditure of Rs 41.88 billion, while the separately reported amounts for recurrent expenditure, capital expenditure and financial management add up to more than that total. The figures should therefore be cross-checked with the official daily budgetary statement before publication.

The broader picture, however, is already clear: the government has begun the fiscal year with revenue flowing into the treasury, but the ability to convert those resources into timely development spending remains the more difficult test.