Every budget is a statement of intent. The Balendra Shah administration’s first is a statement of ambition.

Nepal is at an inflection point. The new government carries a strong mandate and an even stronger set of expectations from Nepalis who demanded reform, opportunity, and an end to drift. Every day, roughly two thousand Nepalis leave the country in search of work they cannot find at home. That figure is the most honest measure of what Nepal's economy has failed to deliver, and the clearest of what this budget must begin to reverse.

Against that backdrop, the temptation would have been a budget of consolation, spreading thin comfort across every constituency. Instead, the government has chosen a harder path — a budget about jobs and growth, vital for Nepal’s working age population that is projected to reach 22 million by 2030. This is, in the best sense, a “grow-so-that-you-can-redistribute” budget, focused on creating prosperity before sharing it.

A coherent theory of growth

The budget lays out a coherent vision: a diversified, largely services-driven economy that is open to the world, with the private sector as the primary engine of growth and job creation and the state as an enabler rather than a competitor.

The tax architecture follows that logic. Doubling the personal income tax exemption to Rs 1 million and trimming the top marginal rate puts money back in the hands of the consuming, investing middle class whose confidence the economy badly needs. Compressing the customs structure from eleven tiers to seven, cutting duties on industrial raw materials so that inputs sit below finished goods, and scrapping excise on some 360 product lines are not giveaways — they are an attempt to make it worthwhile to invest and create jobs in Nepal again. The pledge of tax-rate predictability over a longer horizon, if honoured, matters more than any single rate cut because investors value certainty above almost everything else, as they have indicated in the last World Bank Enterprise Survey.

Alongside the tax reset runs a digital and diaspora agenda that plays to Nepal’s real comparative advantages. A Sovereign AI Computing Centre, a fifty percent income tax exemption on earnings from IT services exports, a simplified tax regime on transfer pricing, and the divestment of a stake in Nepal Telecom with proceeds ring-fenced for digital public infrastructure are not peripheral measures — they are the foundation for the digital economy. A single online window for companies; incentives to draw the skills and savings of Nepalis abroad back home; and legal recognition of remote work for foreign employers together can harness the young demographic and bring the diaspora and the country’s digital potential together.

The budget also brings in welcome fiscal honesty. Scrapping or restructuring nearly fifty public bodies and introducing a new “sunset law” signals a leaner and more efficient state. Executing the capital budget (and using private investment to drive growth) remains Nepal’s greatest Achilles Heel; getting capital budget execution working again will be among the most critical and challenging elements.

The credibility gap that must be closed

No candid assessment can avoid a central tension: Nepal’s budgets have consistently projected growth rates that the economy has not delivered. Over the past decade, actual growth has fallen short of projections by an average of over two percentage points annually. That gap is not a reason to dismiss the budget; it is a reason to ask what is genuinely different this time.

The answer lies in the structural character of the reforms. Eliminating the requirement for prior Nepal Rastra Bank approval for profit and capital repatriation — replacing it with a simple notification — is the kind of change that investor surveys identify as decisive. Unbundling monopoly utilities and compressing a discretionary eleven-tier customs structure are institutional changes that, if legislated and implemented, can fundamentally alter investor perceptions. But optimism must be earned through delivery, quarter by quarter. No amount of legal and technocratic reforms will get Nepal to that 7 percent growth target if the country is not seen by investors, domestic and international alike, as truly open for business.

Infrastructure — Nepal’s growth backbone

If this budget has a spine, it is infrastructure and the services that infrastructure helps deliver. Factories, offices, and hotels need power; tourists and exports need roads and airports; cities need clean water, decent transport, and livability; and a modern economy needs all of them working at once. The encouraging shift here is that infrastructure is being treated less as a list of contracts to award and more as a system to be made to function.

Energy is the first pillar. Unbundling the Nepal Electricity Authority into separate generation, transmission and distribution entities, ring-fencing money for transmission corridors, and, for the first time, allowing private players to trade and export power treats electricity as the foundation of competitiveness rather than a service to be rationed. Unlocking Nepal’s hydropower potential will require close engagement with neighbours and public/private partnership models particularly for the large and transformative projects like Upper Arun. The harder part is execution: transmission lines have to be built and dams commissioned before surplus generation earns any revenues.

The second pillar is connectivity. Transport and urban development command the largest sectoral allocation in the budget, with money behind four-laning the East–West Highway, advancing the Kathmandu–Tarai Fast Track, and opening the Nagdhunga tunnel. Roads and trade corridors are what turn power and produce into income.

But two additional parts of this spine deserve to be singled out, because they carry the services on which Nepal’s growth most depends. One is the capital. The other is the country’s front door.

Kathmandu 2040: A city as a growth platform

There is no path to 7 percent growth that does not run through Nepal’s primate city, Kathmandu, and one commitment in this budget deserves more attention than it has received: Vision Kathmandu 2040. It is easy to read it as a list of basic infrastructure like underpasses, flyovers, river corridors, parks, waste systems and buried utility lines — useful, but unglamorous municipal housekeeping. That reading misses the economics. Cities are where productivity happens. The Kathmandu Valley already generates a disproportionate share of national output, yet it does so despite its infrastructure, not because of it — choked by congestion, poisoned air, a river system that is nothing more than an open sewer, and unplanned sprawl that has all but exhausted the valley’s buildable land. Every hour lost in traffic and every brownout is a quiet tax on the very growth this budget is chasing.

Treated seriously, Vision Kathmandu 2040 is the budget’s most tangible growth platform. Integrated urban infrastructure, a smart-mobility program built around transport sector reform, consolidated routes, and modern public buses is the first and most critical step. Resolving the morass of public transit and congestion — not to mention helping to address the air quality challenge which costs every Nepali nearly 4 years of their life — requires genuine coordination across the federal government, Bagmati Province and the valley’s local governments. The commitment to do so has the potential to convert Nepal’s largest agglomeration from a bottleneck into an engine of growth and jobs. A long term vision and plan can help ensure that this work survives the churn of annual budgets and the temptation to scatter efforts across disconnected projects. A liveable, moving, breathing capital is not a lifestyle luxury. It is where firms choose to locate, where talent stays rather than emigrates, and where the agglomeration effects that lift economies into middle income actually take hold.

Reopening the front door: Aviation and tourism

If Kathmandu is the engine, aviation is the door, and for too long the door has been jammed. Nepal holds a genuine comparative advantage in tourism and the sector can help ensure that a great deal of Nepal’s growth — and a great many of its jobs — will be felt all over the country and not only in the capital.

But average visitor spending in Nepal today stands at around forty-one dollars against a regional average of one hundred and twenty-five. Fixing the way the world flies in is the precondition for changing that. The budget’s tourism wager — higher-spending and longer-staying visitors, and focus on wellness-tourism — only pays off if those visitors can arrive safely and affordably. That is an aviation problem before it is a marketing one.

Which is why the most consequential tourism measure in this budget sits outside the tourism allocation altogether: the long-promised splitting of the Civil Aviation Authority of Nepal into an independent safety regulator and a separate operator of airports and air navigation. International bodies have urged this separation for over a decade, and successive budgets pledged it without delivering. A bill is now before Parliament. Done properly, it is the the first that eventually unlocks Nepal’s removal from the European Union’s air-safety blacklist where the country’s carriers have been stranded since 2013 — if, and only if, the institutional reform is complemented with a credible multi-pronged strategy to improve air safety.

Here, candour serves better than cheerleading. Passing the bill is necessary but not sufficient — removal depends on EASA audit cycles that run a year or more, so the timeline may reach beyond the budget’s mid-January target. The right course is to enact the law now, give the new regulator genuine technical capacity, and treat the audits, not the legislation, as the finish line. The same logic applies to bringing private partners into the underused Gautam Buddha and Pokhara international airports, and upgrading Tribhuvan International Airport. Built airports that sit idle are monuments; airports that move people are platforms for growth and jobs.

Grow first, then share — and do both

The sharpest criticism of this budget is that it favours the middle class while doing too little for the poor. It is a fair concern and deserves a serious answer, not a defensive one.

The answer is sequencing. Nepal cannot redistribute its way to prosperity from an economy that grew below 4 percent last year, where exports have fallen to 7-8 percent of GDP from nearly 25 percent in the early 2000s, and where banks sit on idle deposits because there is too little worth lending against. You cannot share a pie that is not being baked. The single-payer health insurance reform, the expanded social protection, and doubled child-nutrition stipends for the most vulnerable districts are precisely the redistributive commitments that a 7 percent growth path, a wider formal economy, and a broader tax base would make affordable and durable. Growth is not the alternative to fairness in this budget; it is the precondition for it. The government’s task is to deliver visibly on both halves of that bargain, so that the poor see the second half arriving, not just the first.

Two reforms that will decide everything

A good blueprint is not a finished building. Two reform agendas will determine whether this budget becomes history or merely another well-written document.

The first is the business environment. The reforms on paper are genuinely promising — a true single window within 90 days, streamlined repatriation of FX earnings, one-stop approval for board-endorsed investments, commercial benches, modern insolvency and intellectual-property regimes. But Nepal has announced reforms before. What restores private-sector confidence is not the gazette notification; it is the experience of an investor who registers a company in a day, secures approvals without a second queue or having to grease the wheels of the administration with a bribe, enforces a contract in a real commercial court, and trusts that this year’s tax rules will survive into the next. Confidence is rebuilt transaction by transaction. Until the idle liquidity in the banking system finds bankable, de-risked projects to flow into, the growth target will remain an aspiration.

The second, and the more stubborn, is execution — Nepal’s perennial bottleneck. In recent years, only 60-70 percent of the capital budget gets spent; some provinces and ministries disburse far less. A bigger budget that cannot be executed does not accelerate development — it widens the gap between promise and delivery and adds to the debt that finances it. Much criticism has been levied at this budget’s use of debt to finance the fiscal deficit. Debt has increased in Nepal in recent years, but Nepal does not have a debt problem — it has a growth problem. Nepal’s borrowing remains almost exclusively highly concessional and long term, keeping risk of debt distress low. The challenge is deploying that financing effectively: insisting on project readiness before tendering than after; streamlining tree-cutting and forest clearance process; front-loading procurement so the construction season is not lost; multi-year contracting; the smart use of public private partnerships to help manage risk; a disciplined project bank of fewer, better, ready projects; greater flexibility in budget management for line ministries; and procurement rules that reward speed and integrity together.

A blueprint towards escape velocity

Nepal has the design right. The diagnosis is sound, the instruments are mostly the correct ones, and the ambition is matched to the moment. The challenge — well understood by those who crafted this budget — is that ambition without delivery has been Nepal's recurring story. The two thousand people who leave every day are not waiting for another well-designed blueprint; they are waiting for a job that keeps them home.

Twelve months from now, the measure of this budget will not be what was announced, but what changed. Did the investor get the registration she was promised? Did the aviation bill produce a regulator with real independence and real staff? Did the capital budget reach 85 percent rather than 65 percent?

Nepal's development partners, the World Bank Group among them, are ready to back this direction and have a strong interest in helping the government execute it. The blueprint is the right one. Now comes the flying.