Wagle set to unveil large deficit budget above fiscal ceiling

Nepal's Finance Minister Swarnim Wagle is set to unveil a large budget on Friday, exceeding the fiscal ceiling previously set by the National Resource Estimation Committee. Despite concerns over contracting revenue and slower-than-expected foreign grants, the budget aims for an ambitious revenue collection target. The committee had initially fixed the ceiling at Rs1.89 trillion for fiscal year 2026–27, but this was revised to around Rs2.15 trillion at the finance minister’s request. The final budget size is expected to be between Rs2.1 trillion and Rs2.2 trillion, significantly higher than the current fiscal year's revised estimate.

The larger budget reflects high expectations for the new government and increased policy ambitions, with an assumption that governance reforms will boost revenue mobilization. "Expectations from the new government are very high, so we have had to present a large budget with many new programmes," a source involved in budget preparation stated. Infrastructure development remains a central focus, with funding directed towards national pride projects and major initiatives nearing completion. The government plans a phased approach to finishing remaining projects in subsequent years rather than introducing a large number of new ones.

Additionally, the government faces pressure to revise civil servants' salaries. A committee recommended a significant increase, but officials suggest a more modest hike of 10 to 15 percent is likely, coupled with plans to reduce the civil service size and improve pay for remaining staff. Agriculture, energy, and tourism are also slated for priority allocations, with programs aimed at boosting agricultural output, reducing costs, and improving market access. The energy sector is expected to attract increased investment, including more funding for the Nepal Electricity Authority.

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Expectations from the new government are very high, so we have had to present a large budget with many new programmes.