Nepal’s federal budget expands steadily, reflecting growing economic scale and state responsibilities

KATHMANDU: Nepal’s federal budget has shown a clear upward trajectory over the past eight fiscal years, underscoring the expanding size of the economy, rising public expenditure needs, and the growing role of the state in economic management.

Data on federal budget size from fiscal year 2075/76 to 2082/83 reveals a consistent long-term expansion, despite intermittent adjustments linked to macroeconomic pressures and fiscal constraints.

According to the budget figures, Nepal’s total federal budget stood at NPR 131,516 crore in fiscal year 2075/76.

The following year, 2076/77, the budget jumped sharply to NPR 153,297 crore, reflecting the government’s expansionary fiscal stance and increased allocations for infrastructure, social protection, and federal restructuring.

This rise marked a significant step in aligning public spending with the demands of a newly implemented federal system.

In fiscal year 2077/78, the budget size moderated to NPR 147,464 crore. This contraction reflected fiscal caution amid economic uncertainty, as revenue mobilization slowed and external pressures increased.

However, the decline was temporary. By 2078/79, the federal budget expanded again to NPR 164,757 crore, signaling renewed momentum in public spending and economic recovery efforts.

The upward trend became more pronounced in 2079/80, when the budget reached NPR 179,383 crore.

This expansion coincided with increased capital expenditure commitments, higher social sector spending, and efforts to stimulate economic activity through public investment.

The budget size at this stage reflected both inflationary pressures and the government’s intent to support growth in a post-crisis environment.

In 2080/81, the budget slightly declined to NPR 175,131 crore, indicating a recalibration of fiscal priorities. Policymakers sought to balance growth objectives with concerns over fiscal discipline, debt sustainability, and revenue constraints.

Nevertheless, the overall budget level remained significantly higher than in earlier years, underscoring the structural expansion of the state’s fiscal footprint.

The momentum resumed in 2081/82, with the federal budget rising to NPR 186,030 crore. This increase was driven by higher recurrent obligations, growing debt servicing costs, and continued investment in infrastructure, energy, and social protection programs.

The latest figure for 2082/83 shows the budget reaching NPR 196,411 crore, the highest level in Nepal’s fiscal history to date.

From an economic perspective, the steady growth in Nepal’s federal budget mirrors the gradual expansion of the national economy.

A larger budget reflects higher nominal GDP, increased government responsibilities under federalism, and the need to finance development priorities such as roads, hydropower, education, health, and digital infrastructure.

As the economy grows, public expenditure naturally rises to support service delivery, regulatory functions, and long-term development goals.

The expanding budget also has a direct relationship with aggregate demand. Government spending plays a critical role in driving economic activity, particularly in a developing economy like Nepal, where private investment remains constrained.

Capital expenditure on infrastructure creates multiplier effects, generating employment, stimulating domestic industries, and improving productivity over time.

However, the rising budget size also highlights structural challenges. A significant portion of the federal budget continues to be absorbed by recurrent expenditure, including salaries, social security payments, and administrative costs.

This limits fiscal space for capital investment, which is essential for sustainable economic growth.

Moreover, the growing reliance on domestic and external borrowing to finance the budget raises concerns about long-term fiscal sustainability if revenue growth does not keep pace.

Economists note that while the increasing budget size signals economic momentum, the quality and efficiency of spending are equally critical.

Effective budget execution, timely capital expenditure, and strong governance determine whether higher spending translates into real economic gains. Without improvements in implementation capacity, a larger budget alone may not deliver proportional economic outcomes.

Overall, Nepal’s federal budget trend over the years reflects an economy in gradual transition—expanding in scale, taking on greater developmental responsibilities, and navigating the complexities of fiscal federalism.

The challenge ahead lies in ensuring that this growing budget continues to support inclusive growth, macroeconomic stability, and long-term economic resilience.