For the post-September 8-9 government that got off the ground by breaking established, but questionable norms, the federal budget for the fiscal year 2026-27 probably sought to do the same on several fronts. Yet, allegations of wrongdoing by Finance Minister Swarnim Waglé have overshadowed the post-budget debate over its good and bad aspects. The Rastriya Swatantra Party (RSP) government led by Prime Minister Balendra Shah swept into power by crushing the traditional parties in the March 5 elections, with a promise to end corruption and ensure good governance. But the controversy surrounding Wagle’s budget leaves room for criticism.

Shah assumed office on March 27. Yet, kudos to his leadership, some well-established norms that were harming the country have already broken. Ending the practice of appointing the seniormost Supreme Court justice as the Chief Justice tops this list. If the existing tradition held, Justice Sapana Pradhan Malla would be ordained to become the head of the apex court. But the Constitutional Council recommended Manoj Kumar Sharma, who was ranked fourth in a list of six recommended by the Judicial Council; Sharma was sworn in on May 19, thereby drawing the curtain on the well-heeled practice of choosing chief justice on political power-sharing and a give-and-take culture.

Balen, the popular nickname for Balendra Shah, also took on the squatter problem head-on. Until now, the standard practice among the traditional political parties—the Nepali Congress, the CPN (Unified Marxist-Leninist) and the CPN (Maoist Centre)—was to treat this issue as a hot potato. The problem, thus, kept festering, and the squatters were merely being used as a vote bank. For a lack of political leadership, maintaining the status quo had become the norm. Shah’s decision to finally vacate illegal settlements built on public land, followed by a pledge to provide land to the genuine landless squatters within less than two years, opens the door to a just solution, while also laying bare the phony encroachers.

Norms are meant to be broken

Amid these laudable breakthroughs came the budget for the upcoming fiscal year. Leading up to it, public expectations were building in hopes of a meaningful departure from past budgets—sort of breaking the norm and breaking free. Waglé’s budget did that in several ways, yet it was also a continuation of the old days. It is difficult to completely let go and do a U-turn. Breaking the norm, for instance, does not translate to not allocating a budget for infrastructure projects, such as roads and bridges, that began under previous governments. It also does not mean being able to sharply cut the recurring expenditures that soak up two-thirds of the budget, but attempts were made to right-size the white elephant.

With the aim of trimming excess fat, the budget announced that 31 government entities will be abolished, six merged, six transferred and 18 restructured. Waglé’s biggest norm-breaking act is probably the budget size itself. At Rs2,124 billion, this would register growth of 25 percent over the current fiscal’s downwardly revised estimate of Rs1,696 billion. Of this, Rs1,271 billion is earmarked for recurring expenditures, Rs431 billion for capital expenditures and Rs423 billion for debt financing. Sources of funds include Rs1,405 billion in revenue collections, Rs62 billion in foreign grants, and Rs657 billion in loans, consisting of Rs247 billion raised externally and Rs410 billion borrowed internally.

‘Audacious’ is the word that comes to mind when looking at Waglé’s maiden budget. It is highly ambitious of him to expect a growth of 7 percent while containing inflation to 6 percent. If these targets are met, Waglé would have effectively instituted a golden beginning towards attaining the RSP’s goal of doubling Nepal’s per capita income to $3,000 in five years. Otherwise, it would just be a repeat of how things evolved in the past. In years past, budgets were routinely heralded as groundbreaking, only to be revised downward mid-year; the 2025-26 budget was initially targeted at Rs1,964 billion. Just so next year’s budget does not turn into one of those illusions, plenty must go right for Waglé.

Unwise to pooh-pooh right questions

The income tax exemption has been doubled to Rs1 million for individuals. Waglé should hope that the positive effects of this middle-class tax reprieve trickle down to the underclass, which has a very low propensity to save. In the past, revenue collections habitually fell short of goals; Waglé says his lofty goal this time will be met because of changes made in the tax rates. Above all, if the total size of the budget comes up short, the first to get hurt are capital projects, as recurring expenses cannot be avoided, nor can principal and interest payments on debt. It is again the case that infrastructure development will take a hit if the intended foreign grants and loans fail to materialise.

At a time when the economy is struggling to genuinely get going, Waglé needed to come up with an expansionary budget, and he has. He deserves the benefit of the doubt, but at the same time, he has been drawn into controversy over the alteration of the economic (finance) bill after it had already been presented to Parliament. Waglé sought to explain it away by even saying that his few alterations in tax rates pale in comparison to the 73 amendments he said were made by his predecessor under the KP Oli government; if anything, this is a lame excuse. One after another misstep by the previous governments led to their eventual downfall. There is a reason why a four-year-old party is in power.

If questions are raised—either in Parliament or in public—it would be wise to answer them properly. It is always tempting to look for shortcuts and roundabout answers, but in the long run, they tend to backfire. Setting up an independent body to investigate the allegations of wrongdoing by Wagle would have been the right approach. It is important to remember that voters turned out in droves to make sure Shah becomes the next prime minister. Early signs are very encouraging, and, for the good of the country, he needs to last—not just the next five years, but longer. For this, Balen would need utmost cooperation from each of his Cabinet members, who can least afford to stumble.