A post-budget discussion organised by the Economics Student's Society (ECOSS) of the Central Department of Economics, Tribhuvan University, on Tuesday brought together key figures from government, private sector, and academia to examine the budget for the upcoming fiscal year.

Panellists welcomed some progressive moves in the fiscal policy, but raised concerns over issues like policy implementation, fiscal indiscipline, and the persistent size of Nepal’s shadow economy.

This year’s budget totals Rs1,964.11 billion, of which Rs1,180.98 billion (60.1%) is allocated for recurrent expenditure, Rs407.89 billion (20.8%) for capital expenditure, and Rs375.24 billion (19.1%) for financing arrangements.

Speaking at the event, Shyam Prasad Bhandari, joint secretary at the Ministry of Finance, defended the rise in recurrent expenditure in the FY 2025-26 budget, stating that much of the allocation labelled as recurrent includes fiscal transfers that ultimately support capital development at the provincial and local levels.

“Yes, government expenses are high. But fiscal transfers—although recorded under recurrent headings — are often utilized for infrastructure and capital projects,” Bhandari said. Bhandari acknowledged revenue leakages due to Nepal’s open border with India but maintained that there is still fiscal space available for productive investment.

Highlighting the brighter side, Bhandari said that Nepal has achieved self-sufficiency in egg production and is nearing the same status in paddy due to improved irrigation. “The situation has evolved. There are economic positives, and we must acknowledge them,” he said.

Anjan Shrestha, senior vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said that there is a negative perception towards the private sector in Nepal. “The private sector contributes 80-82 percent to Nepal’s GDP. Yet, policy hurdles and instability continue to stifle enterprise growth,” he said.

He stressed that recommendations from the High-Level Economic Sector Reform Advisory Commission must be acted upon promptly.

“Even after a law is passed, the delay in formulating regulations undermines effectiveness,” Shrestha added.

Shrestha also warned that the growing size of the shadow economy hurts both formal businesses and government revenue. “Products are entering Nepal unchecked, while genuine businesses are facing unfair competition. The government must take action,” he said. He also questioned the government’s domestic borrowing plan, stating, “If the government aims to raise Rs 3 billion from the domestic market, how will the private sector compete for credit?”

Dr Kalpana Khanal, senior researcher at the Policy Research Institute, criticised the trend of overambitious budgets. “Every year, we see bloated budgets without confirmed resources. Mid-year cuts follow. This cycle must stop,” she said.

Khanal welcomed the new threshold of Rs30 million for federal projects, which she said would help ensure better project planning. However, she raised serious concerns over border-level resource leakage. “During the pandemic, when human intervention was minimal, revenue collection peaked. This proves there is significant leakage in normal times, which requires stricter accountability,” she said.

She also cautioned that foreign aid should be directed only to projects with completed feasibility studies to ensure efficient capital utilization.

Prof Dr Ram Prasad Gyanwali, head of the Central Department of Economics and a member of the High-Level Economic Sector Reform Advisory Commission, said the new budget reflects improved fiscal discipline. He lauded the decision to raise the age threshold for senior citizen allowances to 70, calling it a “bold and necessary move”.

“The government has taken several recommendations from the Commission, including the emphasis on increasing capital expenditure. From Rs352 billion last year, capital allocation has increased to Rs407 billion this year. This investment will have a multiplier effect, boosting employment and growth,” he said.

Gyanwali also praised the IT sector incentives in the budget, including a reduction of the IT export tax to 5 percent, a 75 percent tax waiver on income from IT exports, and a full income tax exemption for startups earning up to Rs 100 million annually for their first five years. In addition, the import duty on batteries and equipment for solar and wind energy storage has been slashed to one percent.

Subash Baniya, a first-semester MA Economics student at the Central Department of Economics, TU, contributed to the news.