Government presents Rs 2,124.34bn budget for fiscal year 2026/27

• Economic targets: The budget targets an economic growth rate of 7% for the upcoming fiscal year. Inflation is projected to be limited to 6%.
• Tax relief: To provide relief to the middle class, the income tax exemption limit has been doubled to Rs 1 million for individuals. Additionally, the maximum personal income tax rate has been reduced by 10 percentage points.
• Technology and AI: The government plans to establish the country's first sovereign artificial intelligence compute centre in Syuchatar, Kathmandu.
• Salary increments: Government employees will receive a 10% increase in their starting salary scale. A performance-based monthly incentive allowance equivalent to 10% of the new salary scale will also be introduced.

KATHMANDU: The federal government on Friday presented a budget of Rs 2,124.34 billion for the fiscal year 2026/27. Finance Minister Dr Swarnim Wagle unveiled the income and expenditure estimates during a joint sitting of the Federal Parliament.

According to the minister, Rs 1,270.58 billion, or 59.8% of the total, has been allocated for current expenditure. Capital spending has been set at Rs 431.10 billion, or 20.3%, while Rs 422.64 billion, or 19.9%, is earmarked for financial management. The expenditure estimate is 25.2% higher than the revised estimate for the current fiscal year.

Revenue projections include Rs 1,405.31 billion from domestic revenue and Rs 61.74 billion in foreign grants. The government expects a budget deficit of Rs 657.29 billion; Rs 247.28 billion of the shortfall will be met through foreign loans and the remaining Rs 410.00 billion through internal borrowing.

Under fiscal transfer provisions for the federal system, Rs 61.50 billion will be disbursed to provincial governments and Rs 90.20 billion to local levels as equalisation grants, following recommendations from the National Natural Resources and Fiscal Commission. Supplementary grants of Rs 4.60 billion for provinces and Rs 8.93 billion for local bodies are included for infrastructure projects. Special grants total Rs 3.82 billion for provinces and Rs 9.40 billion for local levels. Conditional grants for federal projects amount to Rs 39.72 billion for provinces and Rs 206.08 billion for local governments. In addition, a total of Rs 175.00 billion is expected to be transferred to provinces and local levels through revenue sharing.

Key highlights of the budget include economic targets of 7% growth and inflation contained at 6% for 2026/27. Tax relief measures raise the individual income tax exemption limit to Rs 1 million and reduce the maximum personal income tax rate by 10 percentage points. The government plans to establish the country’s first sovereign artificial intelligence compute centre in Syuchatar, Kathmandu. Government employees will receive a 10% increase in their starting salary scale, and a performance-based monthly incentive equal to 10% of the new starting scale will be introduced.

The finance minister presented the income and expenditure estimates during the parliamentary session earlier today as lawmakers began scrutiny of the proposals. 

The budget will now proceed through parliamentary review and approval.