Swarnim Wagle’s Budget Faces Criticism Over Lack of Vision and Reform

KATHMANDU: The increase in the income tax exemption threshold to Rs. 1 million and a salary hike for government employees emerged as the most prominent highlights of Finance Minister Dr. Swarnim Wagle’s budget announcement. Beyond these measures, however, the budget offers little that is likely to generate enthusiasm among ordinary citizens or inspire confidence in the broader economy.

Although the budget appears to acknowledge the concerns of the middle class, it largely overlooks lower-income groups. New taxes imposed on essential sectors such as healthcare and education are expected to add to the financial burden already faced by households struggling with rising living costs. The government’s much-publicized “transformative” budget introduces a 3 percent tax on services in these critical sectors, raising concerns about affordability and access.

The introduction of Value Added Tax (VAT) on electricity bills is another contentious measure. At a time when households have begun adopting electric cooking appliances as part of Nepal’s clean energy transition, higher electricity costs could discourage that shift.

Similarly, while investors initially welcomed the announcement that capital gains tax would be treated as a final tax, the accompanying Economic Bill increased the applicable rate from 7.5 percent to 10 percent, effectively dampening market optimism. The real estate sector, already struggling with declining transactions and weak demand, also faces additional taxation, with rates rising from 5 percent to 7.5 percent.

Before concluding his speech, Minister Wagle remarked that “if a budget document fails to connect with citizens, its numbers and figures remain lifeless.” Ironically, many observers argue that the budget itself reflects that very criticism.

The budget is ambitious in scale and packed with programs, yet many of its proposals lack clear funding sources or implementation strategies. Initiatives such as the Quadrilateral Development Framework and Vision Kathmandu 2040 have been announced, but questions remain about their feasibility and financing.

Agriculture has been declared a top priority, but the budget offers no major initiatives to promote large-scale commercial farming or attract significant private investment into the sector. Existing mechanisms have largely been repackaged under new names, with the so-called “Investment Express” appearing little different from previous one-door service schemes.

Economic realities beyond Nepal’s borders also appear to have received insufficient attention. Rising trade costs linked to India’s export policies and inflationary pressures stemming from geopolitical tensions in the Middle East could further increase prices. Despite these risks, the government projects inflation at 6 percent without introducing meaningful measures to shield consumers from rising costs.

Critics argue that the budget neither encourages private sector investment nor delivers substantive structural reforms. Instead, it expands government liabilities while reducing revenue-generating capacity, potentially undermining fiscal discipline in the years ahead.

Questions have also been raised regarding inconsistencies between the budget speech and the Economic Bill. While the minister announced the formation of a study committee to examine a multi-rate VAT system, the Economic Bill grants authority to implement such changes through a gazette notification. Opponents contend that this effectively bypasses parliamentary oversight on a policy with significant long-term implications.

The government has also proposed raising funds through offshore bonds denominated in Nepali currency, clean energy bonds, and diaspora bonds. However, these instruments are not entirely new. Similar diaspora bond programs have struggled to attract sufficient investment, with previous issuances remaining undersubscribed for years.

The budget lacks a compelling vision capable of inspiring entrepreneurs, investors, or ordinary citizens. While Minister Wagle’s presentation style remains eloquent and persuasive, critics say the substance falls short of expectations.

Plans to sell shares of Nepal Telecom to the public and operate state-owned enterprises such as Gorakhkali Rubber Industry through public-private partnerships reflect an effort to reform public enterprises. Yet concerns persist over whether these initiatives will address deeper structural inefficiencies.

Perhaps most strikingly, despite years of criticism directed at previous governments for rising public debt, the new budget proposes financing approximately one-third of its Rs. 2.124 trillion expenditure through borrowing. With Nepal’s total public debt already approaching Rs. 3 trillion, sustained borrowing at the proposed pace could add another Rs. 3 trillion within the government’s current term.

Without the salary increase for civil servants and the expanded income tax exemption, critics argue the budget would offer little to either boost public confidence or strengthen investor sentiment. For a budget presented as transformative, many observers see it as a significant missed opportunity—one that ultimately remains more rhetorical than revolutionary.