Budget ignores the concerns of lower income groups

Nepal's government has introduced its largest-ever budget, a Rs2.12 trillion fiscal blueprint, but critics argue it prioritizes the middle class and neglects the concerns of lower-income groups. Finance Minister Swarnim Wagle unveiled the budget, exceeding the National Planning Commission's suggested outlay of Rs1.89 trillion, a decision some opposition leaders labeled "vote-bank politics."

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The government’s national goals must also be equitable.

The budget offers significant benefits to the middle class, including a 21 percent salary increase for civil servants and a cap of 1 percent on taxes for individual incomes up to Rs1 million. However, these measures are expected to exacerbate financial burdens for the poor, who will see little benefit from tax reductions while facing disproportionate increases in the prices of daily necessities, housing, and transportation. The government's aim for 7 percent annual growth while targeting 6 percent inflation suggests an acceptance of rising prices resulting from the new financial outlay.

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In doing so, he ignored the suggestion of the National Planning Commission that the annual outlay be under Rs1.89 trillion, given the country’s resource constraints and the state’s old inability to spend.

While the budget includes provisions aimed at boosting the economy, such as waiving excise duties on 360 imported items and consolidating other taxes, these policies carry risks. If Nepal cannot enhance its industrial capacity and competitiveness, these measures could primarily boost imports, widening the trade deficit and potentially hindering domestic job creation. The budget also proposes laudable measures for the IT sector, including foreign investment and a fintech marketplace, vital for economic impetus. However, the disproportionate benefits to higher income groups raise questions about equitable development.

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The Balendra Shah government, nonetheless, brought a bloated budget that by and large catered to the middle class, in a move some opposition political leaders termed ‘vote-bank politics’.