KATHMANDU, June 3: The government has defended the size of the expenditure earmarked for the next fiscal year (FY), arguing that it is relatively modest in proportion to the country’s gross domestic product (GDP), despite mounting criticism from various quarters over the announced budget.
Speaking at a post-budget discussion program in the capital, Finance Minister Swarnim Wagle said the estimated budget amounts to 28.5 percent of GDP. “During the COVID-19 years, annual budgets were as high as 37 percent of GDP,” Wagle noted.
The newly unveiled budget for FY 2026/27 has set government expenditure at Rs 2.124 trillion. To finance this, the government aims to collect Rs 1.404 trillion in revenue, while expecting Rs 61.74 billion in grants and Rs 247 billion in foreign aid.
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Currently, the country’s GDP stands at around Rs 6.6 trillion. With a projected growth rate of seven percent and inflation at six percent, the GDP is estimated to exceed Rs 7.458 trillion at current market prices. “If the previous trend of budgets exceeding 30 percent of GDP were followed, the budget size would have to reach between Rs 2.5–2.6 trillion,” Wagle argued, defending against criticism of an ‘exorbitant’ budget size.
Experts, however, remain skeptical. Tax expert Rup Bahadur Khadka said the government’s ambitious revenue target is unrealistic, noting that revenue growth is achievable only at a maximum of 12–13 percent under current economic conditions.
Former Finance Minister Yubaraj Khatiwada criticized the government’s reliance on consumption-driven growth, warning that it may fail to generate sufficient employment. “The budget has overlooked tax reforms necessary to support production-oriented sectors,” he said.
The government has extended the lower slab of income tax to Rs 1 million from Rs 600,000 annually. While this provides relief to low-income groups, Khatiwada cautioned that reducing the upper slab rate from 39 percent to 29 percent could encourage imports of luxury goods.
Experts further argued that economic transformation from agriculture to industry is impossible without strengthening small, medium, and cottage industries. They pointed out that the budget lacks concrete measures for capital mobilization, technological advancement, and market protection in this sector. According to them, strategic tax reforms are essential to boost business confidence and foster an investment-friendly environment.
Amid criticism that the budget will exacerbate the debt burden, Wagle insisted that net public debt earmarked for the next FY remains within limits. The Finance Commission has directed the government to keep public debt below 4.5 percent of GDP.
“Although we have proposed additional borrowing of Rs 410 billion, about Rs 270 billion will be used for debt servicing to settle old dues,” Wagle clarified.
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