Finance Minister Swarnim Wagle on Friday unveiled a Rs 2.124 trillion budget for Fiscal Year 2026/27, presenting a distribution-oriented plan that has raised concerns over its heavy reliance on debt financing. The announcement, made at a joint session of the federal parliament, exceeded the Rs 1.89 trillion ceiling earlier recommended by the National Planning Commission.
The new budget marks an 8.14 percent increase from the current year’s estimate of Rs 1.964 trillion. Of the total allocation, Rs 1.271 trillion has been earmarked for recurrent expenditure, Rs 422 billion for financial management including debt servicing, and Rs 431 billion for capital expenditure—20.29 percent of the total. The capital allocation is Rs 23.11 billion higher than last year, despite the government’s persistent struggle to utilize development funds effectively.
To finance the ambitious plan, the government has targeted Rs 1.404 trillion from revenue collection, Rs 61.74 billion from grants, and Rs 247 billion from foreign aid. The shortfall of Rs 657.29 billion will be met through Rs 247.28 billion in foreign loans and Rs 410 billion in domestic borrowing. After accounting for repayments of Rs 245.89 billion on internal loans, net domestic mobilization will stand at Rs 164.11 billion.
The budget introduces measures aimed at appeasing the middle class and providing relief to salary earners. These include raising the exemption limit for income tax, increasing salary scales for government employees, and removing excise duty on several goods. While these steps are expected to ease household burdens, critics argue that the government’s reliance on loans undermines its pledge to present realistic and sustainable budgets.
Expecting 7% Growth
The government has projected the economy to grow by 7 percent.
While presenting the annual budget for fiscal year of 2026/027 at the joint meeting of the federal parliament- the House of Representatives and the National Assembly today, Finance Minister Dr. Swarnim Wagle said that the economy is expected to grow by 7 per cent with the implementation of the budget.
With the economic growth, the inflation is expected to be contained at 6 per cent in the upcoming fiscal year.
The government has decided to discontinue three Nepali embassies and two consulate general offices as part of a revised economic diplomacy strategy aimed at streamlining its overseas presence.
Some embassies will be closed
Presenting the federal budget for Fiscal Year (FY) 2026/27 in Parliament on Friday, Finance Minister Dr Swarnim Wagle announced that Nepal will close its embassies in Denmark, Brazil and South Africa.
He also said the government will shut down the Consulate General Offices in San Francisco and Chengdu, along with the embassy branch in Visakhapatnam, India.
According to the government, the decision has been taken in line with evolving priorities in economic diplomacy and efforts to rationalise and make more efficient Nepal’s diplomatic network abroad.
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