Nepal's budget aims for jobs and growth, signaling ambition

Nepal's government has unveiled its first budget, signaling a bold ambition to steer the nation toward jobs and growth. With roughly two thousand Nepalis leaving the country daily for work, the budget aims to reverse this trend by focusing on economic expansion and opportunity at home.

The administration has opted for a "grow-so-that-you-can-redistribute" strategy, prioritizing the creation of prosperity before redistribution. This approach is reflected in tax reforms designed to stimulate the economy. The personal income tax exemption has been doubled to NPR 1 million, and the top marginal rate has been reduced. Customs duties have been compressed, and import duties on industrial raw materials have been cut to make inputs cheaper than finished goods. Excise duties on hundreds of product lines have also been eliminated.

Beyond tax adjustments, the budget champions a digital and diaspora agenda. Plans include establishing a Sovereign AI Computing Centre, offering a 50% income tax exemption on IT service exports, and simplifying transfer pricing tax regimes. A portion of the proceeds from divesting a stake in Nepal Telecom will be dedicated to digital public infrastructure. The government also aims to attract the skills and savings of Nepalis living abroad through incentives for remote work and simplified business registration.

The budget also signals a commitment to fiscal responsibility, with plans to scrap or restructure nearly fifty public bodies and introduce a "sunset law" to ensure a leaner state. The emphasis is on enabling the private sector as the primary engine for growth and job creation, with the state acting as a facilitator rather than a competitor.