Nepal Unveils NRs 2.12 Trillion Budget, Focus on Financial Reforms

• Nepal's ₹2.124 trillion budget is PM Shah's reform-focused first budget, prioritising agriculture, foreign investment, and 25% spending rise while easing middle-class tax burdens

• Major allocations for education (₹218B), health (₹101B), electricity expansion to 5,535 MW, and agricultural support through fertiliser subsidies and irrigation projects

• Forward-looking plan establishes Kathmandu's Sovereign AI Compute Centre for AI era entry and targets LDC graduation within 2 years through technology and innovation-driven transformation

Nepal government on Friday presented a budget of Nepalese rupees 2.124 trillion for the 2026-27 fiscal prioritising financial and sectoral reforms, agriculture and bringing foreign in investments.

The Nepalese rupees (NRs) 2.124 trillion budget, which is 25% more than the revised estimate for the current fiscal year's budget, and expects a revenue of NRs 1405.31 billion.

This is Prime Minister Balendra Shah-led government's first budget presentation after he assumed office in March after the Rastriya Swatantra Party (RSP) secured an almost two-thirds majority in the House of Representatives elections held on March 5.

Earlier, the Economic Survey released on Wednesday said Nepal's economy is expected to grow at 3.85% in 2025-26, despite uncertainty in the global economy and the ongoing West Asia conflict.

On Friday, Finance Minister Swarnim Wagle presented the income and expenditure estimates for the upcoming fiscal year 2083/84 BS (Bikram Samvat) -- beginning July 16, 2026 -- in a joint meeting of both houses of the federal Parliament.

In the NRs 2.124 trillion budget for fiscal year 2026-27, the finance minister allocated NRs 1.270 trillion, or 59.8%, for current expenditure; NRs 431.10 billion, or 20.3%, for capital expenditure, and NRs 422.64 billion, or 19.9%, for financial management.

As per the resource allocation for the budget, the government is expecting NRs 1405.31 billion from revenue, NRs 61.74 billion from foreign grant, NRs 247.28 billion from foreign debt and NRs 410 billion from internal debt.

Aimed at the common man, the salary of a government employee will be increased by 21% and only 1% income tax will be charged for up to NRs 1 million monthly income, up from previous year's NRs 5,00,000. The budget also raised the personal income tax exemption threshold from NRs 6,00,000 to ₹1 million, aimed at easing the burden on middle-income earners.

There would be NRs 218 billion allocation for the education sector while NRs 101 billion has been allocated for the health sector, including NRs 15 billion for health insurance.

NRs 70 billion has been allocated for the completion of transmission lines and substations currently under construction, NRs 1.83 billion has been allocated for underground irrigation systems covering 3,180 hectares of land in the Terai and NRs 530 million has been allocated for the Sunkoshi–Marine Diversion Project to enhance irrigation and water supply in the Terai.

The country’s installed electricity generation capacity is projected to reach 5,535 MW in the next fiscal year. The current hydro-electricity generation capacity stands at around 3,600 MW.

Wagle announced an increase in allocation for chemical fertiliser purchase to NRs 32.36 billion, NRs 2.4 billion to control livestock diseases, including foot-and-mouth disease, and proposed electricity subsidies for the private sector to promote green urea fertiliser production.

Nepal will be established as a “knowledge-based economy” in the coming decade, focusing on modern technology and financial engineering, Wagle said, primarily integrating AI (Artificial Intelligence), Start Ups, innovation, and strategic utilisation of foreign currency in his speech.

With the aim of entering the AI era, it was announced to establish the country's first 'Sovereign AI Compute Centre' in Syuchatar, Kathmandu, and to purchase thousands of 'AI Processing Units.' The budget also announced a national campaign to support Nepal’s graduation from the United Nations’ least developed country category.

Wagle said Nepal had already met the minimum criteria required for graduation from the least developed country status. “However,” he said the government had decided to pursue the transition over the next two years through an intensive national economic and social transformation campaign.