Govt unveils bold reforms to boost private investment and revamp tax system

KATHMANDU: In a significant push to stimulate economic growth, the Nepal government has announced sweeping policy reforms to promote private investment and introduce structural changes to the tax system. The reforms, outlined in the government’s policy and program for the upcoming fiscal year, were presented by President Ramchandra Paudel on Thursday, signaling a robust commitment to fostering a business-friendly environment.

“Further policy reforms and procedural simplifications will be implemented to promote private investment and create a conducive business ecosystem,” Paudel said during the unveiling of the policy and program. The announcement builds on the government’s earlier efforts, including an ordinance issued last December to amend laws facilitating investment. The ordinance replacement bill, passed and certified a month ago, has already been hailed by the private sector as a step toward easing business operations.

A cornerstone of the government’s strategy is a structural overhaul of the tax system to enhance the economy’s competitive edge. “The tax system will undergo structural reforms to boost the economy’s global competitiveness,” the policy document stated. The government aims to channel public sector investments to complement private sector growth and attract private capital to public infrastructure projects, a move expected to unlock new economic opportunities.

The policy also includes privatizing underperforming public enterprises. “Following a comprehensive review of public enterprises, they will be restructured, transferred to the private sector, or monetized through appropriate mechanisms,” the policy and program declared. This aligns with recommendations from a high-level economic reform advisory commission, led by former secretary Rameshwar Khanal, which the government plans to implement to dynamize the economy.

To achieve high, sustainable, and inclusive economic growth, the government will promote public-private partnerships (PPPs) and ensure coordination between fiscal and monetary policies. “PPPs will be incentivized to drive economic expansion while maintaining policy synergy,” the document noted. Analysts view this as a critical step to bridge infrastructure gaps and stimulate private sector participation in large-scale projects.

The government’s agenda includes implementing the second financial sector development strategy to strengthen financial institutions and promote industrial growth rooted in local raw materials, entrepreneurship, and skills. In a bid to nurture innovation, business promotion centers will be established in all provinces in collaboration with the private sector. These centers will focus on capacity building and market access for startup entrepreneurs, fostering a new wave of economic dynamism.

The private sector has cautiously welcomed the announcements but emphasized the need for swift implementation. “The reforms sound promising, but their success hinges on effective execution and transparency,” said a representative of the Federation of Nepalese Chambers of Commerce and Industry.

The government’s proactive stance comes amid challenges such as bureaucratic inefficiencies and economic slowdown. By prioritizing private investment and tax reforms, Nepal aims to position itself as an attractive destination for domestic and foreign investors. However, stakeholders stress that sustained political will and stakeholder collaboration are essential to translate these policies into tangible outcomes.

With the policy and program setting an ambitious roadmap, all eyes are on the government to deliver on its promises and catalyze Nepal’s economic transformation in the coming fiscal year.