Finance Minister Wagle defends budget 2083/84, Says new taxes will fund education reform and infrastructure

KATHMANDU: Finance Minister Swarnim Wagle has defended the government’s fiscal policies for the upcoming Fiscal Year 2083/84, arguing that the budget is not excessively ambitious and is, in fact, relatively modest when measured against Nepal’s gross domestic product (GDP).

Speaking at a post-budget press conference at the Ministry of Finance on Sunday, Wagle responded to concerns raised by businesses, investors, education providers, healthcare institutions and consumers over a series of tax measures announced in the national budget. He maintained that the new tax policies are designed to promote social equity, strengthen public services and support long-term infrastructure development while simultaneously providing meaningful tax relief to the middle class.

Budget Size Not Excessive Compared to Economy

Addressing criticism that the government had introduced an overly ambitious budget, the finance minister said the budget’s size remains moderate in relation to the overall economy and has been carefully calibrated to balance economic growth, social spending and fiscal sustainability.

He emphasized that the government’s objective is not merely to increase spending but to channel resources toward productive sectors capable of generating long-term economic returns.

The minister argued that the budget seeks to create a balance between welfare programs, infrastructure investment and private-sector participation in economic development.

Government Defends ‘Equity Tax’ on Education and Health

One of the most debated provisions in the budget has been the introduction of what the government describes as an “equity tax” affecting certain education and health services.

Wagle said the concept is not new and had existed in Nepal’s tax system in previous years before being withdrawn.

According to him, the government has substantially expanded social protection commitments, including a decision to double child nutrition allowances, creating an additional annual fiscal burden of approximately Rs 6 billion.

To support these commitments, revenue generated through health-related taxes and equity-oriented taxation measures will be directed toward nutrition programs and broader social sector investments.

“This is not a policy intended to burden the middle class,” Wagle said. “The objective is to improve the quality of education in community schools and strengthen social services.”

The minister pointed to improvements in public education achieved under the administration of Balendra Shah at Kathmandu Metropolitan City, where reforms in community schools have increased public confidence in government-run educational institutions.

He said the federal government intends to replicate similar improvements nationwide so that public schools become increasingly competitive with private institutions.

Electricity VAT Introduced to Fund Future Energy Infrastructure

The finance minister also addressed criticism over the newly introduced 5 percent Value Added Tax (VAT) on electricity consumption.

According to Wagle, Nepal’s rapidly rising electricity demand requires significant investments in transmission lines, substations, transformers and other energy infrastructure.

He argued that the government has intentionally shifted part of the tax burden away from income and toward consumption.

“A one percent reduction in income tax for individuals earning up to Rs 1 million annually is not a small concession,” he said. “Our policy is to reduce taxes on income while moderately increasing taxes on consumption.”

The minister stressed that the actual impact on most households would be relatively small.

Under the new structure:

• Consumers using up to 50 units of electricity per month will face no additional tax burden.
• Households consuming up to 150 units monthly are expected to pay approximately Rs 24 extra per month.
• Most families are expected to face an additional monthly cost ranging from Rs 25 to Rs 100.

Nepal’s Electricity Infrastructure Not Ready for Mass Electrification

Wagle also highlighted concerns about the country’s energy infrastructure capacity as Nepal pushes toward greater electrification.

He warned that if all households simultaneously switch to induction cooking and electric vehicles (EVs), the existing power distribution system could come under severe strain.

“If everyone starts using induction stoves and electric vehicles immediately, the current infrastructure will not be sufficient,” he said. “Transformers could fail under such pressure.”

The minister said investments in power infrastructure must therefore accompany the government’s broader strategy to promote clean energy consumption and reduce dependence on imported fossil fuels.

Middle Class Has Received Significant Tax Relief, Says Minister

Defending the overall fiscal package, Wagle argued that the government has provided substantial tax relief and incentives to middle-income earners.

According to him, maintaining fiscal balance requires trade-offs, and some policy compromises are inevitable when the government simultaneously seeks to expand social spending, improve public services and increase infrastructure investment.

“The middle class has received meaningful tax concessions. To sustain those benefits, certain compromises are necessary,” he said.

Capital Gains Tax to Remain Final Tax

The finance minister also sought to reassure investors regarding changes in capital gains taxation.

Responding to concerns from stock market participants, he clarified that capital gains tax on share transactions will continue to be treated as a final tax and will not be subject to additional taxation.

“Capital gains tax remains a final tax,” Wagle stated.

Under the revised structure:

• The tax rate on one category of gains has been increased from 5 percent to 7.5 percent.
• Another category has been adjusted from 7.5 percent to 10 percent.

The minister said these changes were made after considering investor feedback and market conditions.

He rejected concerns that the revisions would discourage investment, arguing that the tax adjustments are moderate and maintain Nepal’s competitiveness as an investment destination.

Government Promises ‘Big Bang’ for Economy and ‘Big Push’ for Infrastructure

Looking ahead to the next fiscal year, Wagle outlined an ambitious development agenda centered on digital transformation, information technology, physical infrastructure and private-sector-led growth.

He said the government plans major investments and policy incentives aimed at accelerating economic activity and improving productivity.

“We will deliver a ‘Big Bang’ for the economy and a ‘Big Push’ for infrastructure,” he said.

The minister claimed that many business leaders have responded positively to the budget and view it as one of the most private-sector-friendly fiscal plans introduced in recent years.

Private Sector Positioned as Key Growth Partner

Wagle emphasized that the government sees the private sector as the principal partner in achieving higher economic growth, job creation and industrial expansion.

The budget prioritizes:

• Private investment promotion
• Infrastructure development
• Information technology and digital economy expansion
• Employment generation
• Industrial productivity
• Energy sector modernization
• Education and human capital development

According to the finance minister, the government expects these measures to improve investor confidence, stimulate business activity and support Nepal’s broader economic transformation agenda.

The remarks come as businesses, investors, educational institutions and consumers continue to analyze the implications of the Fiscal Year 2083/84 budget, which has sparked extensive debate over taxation, social spending, economic growth and the future direction of Nepal’s fiscal policy.