Budget 2026: Audacious Intent, Uncertain Delivery

On the afternoon of May 29, Finance Minister Dr Swarnim Wagle walked into a joint session of Nepal’s Federal Parliament carrying the national budget in a file made of handmade Nepali paper. A deliberate departure from the red briefcase tradition. He then delivered a carefully curated story to pitch ambitious reforms that only a government with this scale of mandate can. 

At Rs 2,124 billion, the largest in Nepal’s history, this budget arrives with genuine political authority. The headline measures are crowd-pleasing and substantively real. But questions around fiscal honesty, foreign investment and the tech hub dream expose the gap between the document and reality. 

What He Said, and What He Didn’t 

When Wagle spoke about capital gains tax, he characterised the change as making the levy ‘final’, i.e. simplification for investors. What he did not mention was that the Finance Bill, tabled simultaneously, quietly raised the rates. Those watching the speech came away believing taxes were broadly declining. Those who read the Finance Bill discovered a more complicated truth. There are a number of surprises like this which the public unearthed in the after hours. 

Technically accurate. Politically shrewd. It was selective truth designed to lead with the popular story while burying the unpopular items in subsidiary legislation. For a finance minister of Wagle’s training and calibre, this gap was almost certainly intentional. Budget communication is usually a political theatre anyway. But there is a difference between curating emphasis and engineering false impressions. Did this budget drift closer to the latter than its reform credentials warranted? 

The Fiscal Arithmetic Doesn’t Quite Add Up 

The underlying fiscal arithmetic is fragile. The government is simultaneously spending more, taxing the middle class less and betting that growth momentum closes the gap. Over the past decade, revenue collection has consistently reached only around 87% of budget targets. In the first eight months of this fiscal year, it reached barely half the annual target. The government has increasingly borrowed not merely for development but to cover salaries, social security and debt servicing. 

On the other hand, while recurrent spending takes around 60% of the budget, allocation for capital spend is just 20% – almost identical to Nepal’s 10-year average. The allocated capital budget is insufficient in comparison to the growth aspirations of 7%, and capital expenditure has been significantly under-spent historically. Officials have acknowledged, with unusual candour, that inadequate project preparation is the core problem. Ambitions are designed in Kathmandu. They are executed (or not) by a bureaucratic machinery that has not materially changed. 

Will Foreign Investors Come? 

The budget’s most investor-friendly measures are generally coherent. Most of the announced moves are in the right direction. But it is hard for an investor pitch to survive the FATF grey list. Nepal was placed on the grey list in early 2025, flagging deficiencies in anti-money laundering and counter-terrorism financing. Nepal risks losing correspondent banking relationships entirely which is an existential concern for any investor thinking about profit repatriation. 

To be fair, however, even before the grey list, Nepal’s FDI story was a tale of spectacular pledges and embarrassing delivery. Nepal has held at least six investment summits since 2017.

The gap between what was promised from podiums and what was actually built is staggering. 

Long-horizon investors, particularly in hydropower and digital infrastructure, will find the political stability and reform intent compelling. But for the broader universe of foreign capital Wagle is courting, the FATF grey list alone keeps most institutional investors at bay. The budget sets a credible direction. It is nowhere near a sufficient condition for investment to meaningfully flow. 

The Tech Hub: Real Foundation or Hype? 

Perhaps no part of the budget captures both the genuine potential and the institutional gap more sharply than the technology ambitions. Nepal’s IT services exports are said to have crossed $1 billion in 2025, more than doubling in three years. The number of registered IT companies has risen 10-fold in two years. A number of companies have built credible international practices. These are not phantom numbers. 

The hydropower energy cost argument for data centres also has genuine commercial logic. While US electricity prices range from 10 to 30 cents per kilowatt hour, Nepal’s hydropower can support compute infrastructure at just five to eight cents which is among the lowest rates globally. As AI infrastructure scales globally and energy costs become a primary competitive differentiator, that arithmetic matters.  

But the gap between ‘we have cheap clean power’ and ‘we are a tech hub’ is filled with things Nepal currently lacks. Nepal has no experience connecting hydropower to a hyperscale data centre. Regulations are largely absent. Data protection law is still evolving. International fibre connectivity remains thin. The existing Ncell data centre – Nepal’s most prominent as of now – draws community complaints about diesel generator fumes, noise and dust. That is the current baseline. 

The broader tech hub story also suffers from a related structural failure: brain drain. Nepal generates more than 10,000 ICT graduates annually. But most leave within two years to greener pastures abroad, where salaries are better and infrastructure more reliable. The budget’s answer is 15 overseas fellowships and an AI computing centre! These are directionally correct but woefully insufficient relative to the scale of the ambition. Talented engineers will not return on patriotic sentiment alone. They need reliable power, competitive salaries, merit-based systems and a regulatory environment where building a company doesn’t require navigating years of bureaucratic obstruction. 

Nepal has a credible foundation for a niche, high-value green computing sector, particularly if it can attract one or two anchor hyperscaler partnerships to prove the model. What it does not have, and cannot acquire from a single budget, is the broad-based tech ecosystem it is marketing itself as. Nepal’s IT exports are overwhelmingly back-office service work for Western companies. Moving from service exporter to genuine tech hub requires a different ecosystem entirely. 

Verdict 

This is the most audacious budget Nepal has seen in a generation, and the most credible one given the political conditions behind it. The reform architecture is serious. The mandate is real. The FM knows what he is doing. 

But audacity and transformation are different. This budget’s three most visible ambitions – foreign investment, tech leadership and fiscal transformation – all face the same fundamental obstacle: weak institutional and bureaucratic capacity.  

What happens in the months ahead will reveal if the government will deliver on this budget. Watch whether the Investment Express portal is live within three months. Watch the Q1 capital expenditure figures. Watch whether the commercial tribunal is operational before the next budget is drafted. Watch if Nepal comes off the FATF 
grey list.  

Nepal’s problem has never been a budget lacking ambition. It has been the thousand small failures of execution that accumulate between a finance minister’s speech and a building that gets built. Wagle walked into Parliament with a handmade paper file and a reform agenda years in the making. The symbolism was the easy part.