Government Spending vs Revenue Nepal (2025/26)
One of the most fundamental questions in Nepal's fiscal policy is whether the government earns enough to cover what it spends. The 8-month NRB data for FY 2025/26 provides a clear answer: no — Nepal consistently spends more than it collects.
Revenue Position (8M 2025/26)
- Total Revenue & Receipts: Rs. 751,856.7M
- Tax Revenue: Rs. 676,585.8M (VAT + Income Tax + Customs + Excise)
- Non-Tax Revenue: Rs. 70,694.8M (-13.31%)
- Other Receipts: Rs. 4,576.1M
Expenditure Structure (Budget)
- Recurrent: Rs. 951,503.2M — largest category (salaries, pensions, subsidies, interest)
- Capital: Rs. 207,805.0M — development spending (roads, hydropower, buildings)
- Financial: Rs. 302,281.0M — loan repayments and investments
The Mismatch
Available resources (Rs. 669,668.7M) cover less than half of total planned expenditure. The gap is financed by:
- Domestic borrowing (Development Bonds: Rs. 1,018,897M outstanding)
- Foreign concessional loans
- Drawdown of government balances
Revenue Composition Problems
- Over-reliance on indirect taxes: VAT (30%) + Customs (20.7%) + Excise (16%) = 66.7% — these are regressive, hitting lower-income households harder
- Income tax underperforming: Only 22.7% of revenue and declining (-1.42%)
- Non-tax revenue falling: -13.31% decline suggests government enterprises generating less
Capital vs Recurrent Spending
Recurrent spending (Rs. 951,503.2M) is 4.6x larger than capital spending (Rs. 207,805.0M). This imbalance means most government resources go to maintaining existing operations rather than building new infrastructure — a constraint on long-term development.
Conclusion
Nepal's spending consistently exceeds revenue, requiring growing debt to bridge the gap. The revenue base is narrow, heavily dependent on indirect taxes, and growing slower than the economy. Rebalancing toward more capital spending, broadening the income tax base, and improving non-tax revenue are critical priorities.