FNCCI Offers Mixed Response to Nepal’s 2025/26 Budget, Praises Intent but Questions Implementation

KATHMANDU: The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has issued a mixed reaction to the government’s proposed budget for the fiscal year 2025/26, presented by Finance Minister Bishnu Paudel on May 29. While welcoming the budget’s pro-private sector stance and select policy measures, the FNCCI expressed concerns over implementation gaps, unclear frameworks, and insufficient focus on long-term competitiveness.

In a detailed statement, the FNCCI lauded the budget for recognizing the private sector as a key driver of the economy and incorporating some of its reform suggestions. Notable positives include the government’s commitment to a “single-window system” to simplify business processes, tax exemptions to encourage innovation and startups, and prioritized support for information technology, tourism, and service sectors. The budget’s emphasis on creating a conducive environment through tax relief and incentives was also deemed commendable.

However, the FNCCI highlighted significant shortcomings. It criticized the complex tax structure, noting that the failure to eliminate excise duties and the introduction of new taxes on jewelry and precious stones could discourage formal trade. The retention of Tax Deducted at Source (TDS) on export transactions was flagged as contradictory to export promotion efforts.

The FNCCI also expressed skepticism about the budget’s ambitious plans for industry, exports, foreign investment, infrastructure, and energy, citing a lack of clear institutional mechanisms. While the proposal to empower the Investment Board was welcomed, the absence of a detailed roadmap raised doubts about its effectiveness. The FNCCI reiterated the need for a unified institutional framework involving the Industry Department, Investment Board, and related agencies to ensure sustainable private investment.

In the energy sector, the budget’s push for foreign trade was acknowledged, but the “Take and Pay” policy was criticized for discouraging investors. The FNCCI supported allowing private entities to build distribution lines and charge wheeling fees but called for clearer collaboration models in the production-distribution cycle. On tourism, plans to operationalize Pokhara and Bhairahawa international airports and advance the Nijgadh airport and fast-track projects were praised. However, the FNCCI warned that the value-added tax on air tickets could make Nepal an expensive destination, undermining efforts to boost tourist arrivals.

Describing the budget as a balancing act between limited resources and high aspirations, the FNCCI urged the government to prioritize governance reforms, transparency in public spending, policy stability, and trust-building with the private sector. It called for stronger implementation mechanisms, coordinated administrative systems, and clarity in policies, laws, and procedures. The FNCCI also cautioned against recycling old commitments, emphasizing the need for fresh, actionable plans.

While maintaining an optimistic outlook, the FNCCI stressed that the budget’s success hinges on robust execution and genuine collaboration with the private sector to achieve economic goals.