Finance Minister Dr. Swarnim Wagle Unveils Rs 21.24 Trillion Budget for FY 2083/84

Kathmandu. Finance Minister Dr. Swarnim Wagle unveiled a budget of Rs 21.24 trillion in the joint meeting of the parliament. Rs 12.70 trillion has been allocated for current expenditure and Rs 4.31 trillion for capital expenditure. An allocation of Rs 4.22 trillion has been made for financial management.

Finance Minister Wagle has set the capital budget at 20.3 percent. The budget allocation for financial management has been set slightly lower than that. The government has brought a budget 25.2 percent larger than the revised estimate of the current fiscal year for the upcoming fiscal year.

Out of this, the government estimates to cover Rs 14.05 trillion from revenue and Rs 61.74 billion from foreign grants. The government estimates to take Rs 247 billion in foreign loans and Rs 410 billion in domestic loans.

The private sector has given an overall positive response to the budget brought by the government.

The budget brought by Finance Minister Dr. Swarnim Wagle, of a powerful government with a two-thirds majority, has been welcomed by the private sector as encouraging. Industries and businessmen have expressed happiness, stating that the budget addresses many demands of the automobile sector by making changes in tax rates, promoting domestic production, allowing private sector entry into energy trade, and addressing many demands of the automobile sector.

However, the private sector has expressed concerns about the size of the budget, the target of 7 percent economic growth, and the perennial issue of implementation. Anjan Shrestha, President of the Federation of Nepalese Chambers of Commerce and Industry, stated that the overall budget addresses the issues raised by the private sector. He said that while the budget speech sounded good, the government should now focus on implementing its commitments. He added that they are encouraged by the overall budget and will comment further after studying the remaining details. He said, 'We are encouraged by the overall budget speech. But we still need to look at the details. It seems like they are trying to reduce tax rates. This is a positive aspect for the private sector.'

He also mentioned that efforts are being made to promote agriculture. He noted that a new modality of grants is being introduced and good provisions have been included in infrastructure. He commented that the government has brought the budget more seriously than before. He said, 'In all these respects, it seems the government will proceed more seriously than before, and the implementation aspect of the commitments made now also needs to be looked at. It seems the government will appear more serious than before.'

Tax Rates and Relief for Domestic Production

Virendra Raj Pandey, President of the Confederation of Nepalese Industries, said that the budget is overall private sector-friendly. 'Our demand was that there should be at least one level (5 percent) difference in the customs duty between raw materials and finished goods. This has been modified for more than 233 items, which is a very good aspect,' said President Pandey. He added that the abolition of excise duty on 360 items, changes in income tax limits, and the provision to withdraw tax disputes by paying an additional 1 percent will provide great relief to industrialists.

He also stated that making it easier for foreign investors to repatriate profits is positive. However, he pointed out that the target of reaching 7 percent economic growth from the current around 3.5 percent is very challenging and requires increased capital expenditure.

Similarly, Kamlesh Kumar Agarwal, President of the Nepal Chamber of Commerce, responded that the budget is different from the past and is encouraging for the private sector.

He stated that increasing the income tax limit from 5 and 6 percent to 10 lakh and abolishing excise duty are positive. However, he expressed concern that the domestic loan of approximately Rs 403 billion that the government plans to take to meet the budget deficit could cause liquidity shortages in the banking system and put pressure on interest rates in the future.

He said that the budget has encouraged the private sector. Although the size of the budget presented by the Finance Minister is somewhat large, he said that it is different from the past and addresses many demands of the private sector to a great extent. President Agarwal has taken the changes in tax rates very positively.

'We had requested a reduction in tax rates in the budget, and macroscopically, the tax collection was around 19.9 (20) percent of GDP,' said Agarwal. 'Now the government has removed excise duty on 360 items and reduced customs duties. The limit for personal income tax has been increased from 5/6 lakh to 10 lakh. This will greatly help in expanding economic activities and building a competitive economy.'

Agarwal said that the policy of allowing the private sector to enter international electricity trade and the concessions given in various sectors are easy to implement. He said that although the problem of budget implementation has been a major issue in the past, the private sector is optimistic about the budget being implemented this time because it is a government with a two-thirds majority and is trying to work on a fast track by prioritizing good governance.

He pointed out that to achieve the 7 percent economic growth target set by the budget, emphasis should be placed on credit expansion. 'To achieve an economic growth rate of more than 5.5 percent, credit expansion needs to be more than 20 percent, whereas the current credit expansion of banks is only around 6-7 percent,' he said.

Similarly, Bhawani Rana, former President of the Federation of Nepalese Chambers of Commerce and Industry, said that the budget brought by the government is positive. She mentioned that the budget appears to be private sector-friendly and expressed hope for its implementation. She said, 'The budget sounded good. The government has made many changes in tax rates. There is room for the private sector to be encouraged by this. Prioritizing the participation of the private sector in sick projects and other infrastructure development is a good thing.'

She said that the provision of 40 percent subsidy in the agricultural sector will encourage the private sector to invest in agriculture. She complained that the imposition of fees on electricity would cause some problems for industries.

She said, 'The budget has included many issues. Many policy matters have also been changed. The private sector is encouraged by policy reforms.' She said that the private sector is optimistic about the implementation of the programs brought in the budget because it is a government with a two-thirds majority.

Enthusiasm in the Energy Sector: Path for Private Sector in Electricity Trade Too

Ganesh Karki, President of the Independent Power Producers' Association Nepal (IPPAN), responded that the budget for the energy sector is very fruitful. He said, 'Signing PPAs on a take-or-pay basis for hydropower projects up to 10 MW, allowing the private sector to trade electricity, and arranging a separate budget for transmission lines are extremely positive steps.'

President Karki said that the policy of facilitating tree cutting in forests by bringing a policy of planting a certain number of trees in return for cutting trees will speed up project construction. However, he stated that further clarity is needed on the issue of canceling licenses of those who do not work and on PPAs for RoR projects.

Prakash Dulal, Vice-General Secretary of IPPAN, gave a response that some policies in the budget have created further uncertainty. He said that despite facilitation, some important issues have been missed in the budget, and policy uncertainty has increased. According to him, the government's target of producing 30,000 MW in 10 years, which was set earlier, is not included in the budget.

'The budget has adopted a policy of purchasing only dry season energy on a competitive basis. With the opening of trade for the private sector, producers will now have to find markets for electricity produced in the rainy season themselves, which presents a challenging situation,' said Dulal.

He stated that the budget's policy of splitting Nepal Electricity Authority into three companies for generation, transmission, and trade, and signing PPAs on a take-or-pay model for projects below 10 MW immediately are positive.

He mentioned that the budget's positive aspects include providing special concessions to reservoir-based projects, amending the Forest Act to shorten EIA and tree cutting processes, issuing green bonds, and allowing the private sector to trade with wheeling charges by building transmission lines.

Similarly, he said that the budget remaining silent on projects larger than 10 MW for which PPAs have been halted for a long time has increased uncertainty among investors. He also stated that the government's policy of canceling permits for projects that have PPAs but have not started construction will also affect this sector.

Excellent Budget for the Automobile Sector

Milan Babu Mall, General Secretary of the NADA Automobiles Association of Nepal, said that the automobile sector considers this budget as an excellent budget. He said that imposing a green tax for battery management by removing the excise duty on electric vehicles (EVs) is positive. 'The policy of valuing EVs for customs purposes based on the old system instead of peak power, which was our biggest headache, has provided great relief to businessmen,' said General Secretary Mall.

He stated that overall, the budget has not caused concern for the automobile sector.

Accepting Tourism as a Pillar of Prosperity is Positive

Binayak Shah, President of the Hotel Association Nepal (HAN), expressed happiness that the budget recognizes the tourism sector as a major pillar of economic development and prosperity. He said that declaring 2025 as Visit Nepal Year and 2027 as Wellness Year, and prioritizing Lumbini and Janakpur are positive. He said, 'However, such declarations were made in past budgets as well, but they were not implemented. It is not enough to have good policies; there must be a strong and integrated monitoring mechanism.'

He claimed that if the government creates an environment for implementation, the tourism sector can bring in significant investment to the country.

Similarly, Manoj Babu Shrestha, President of the Nepal National Business Federation, welcomed the customs duty exemption on raw materials aimed at promoting domestic production. He said that policies such as restart loans, women entrepreneur loans, and reopening sick industries like the closed Gorakhkali Rubber Industry in collaboration with the private sector will invigorate the domestic economy.

Similarly, Naresh Katuwal, founder president of the federation, said that the abolition of luxury tax on gold and diamonds (13 percent and 2 percent respectively) is welcome. He said that overall, the budget has given a positive message to small and medium-sized industries.

He said, 'The government's policies on abolishing excise duty, reducing income tax, and other matters are positive. Many issues of the private sector have been included. The policy reforms intended are positive. Emphasis needs to be placed on implementation.'

He said that the private sector has confidence in the implementation because the current government has a two-thirds majority to bring programs and implement them.

Budget Towards Capital Market Reform

The Nepal Stock Brokers Association has given a positive response. Sagar Dhakal, President of the Association, said that the announcements related to capital market reform, technology-friendly trading systems, attracting non-resident Nepali investment, and the introduction of modern financial instruments are welcome.

He stated that the budget will make a significant contribution to reforming Nepal's capital market and creating an investment-friendly environment. He said, 'This year's budget seems to have accepted Nepal's capital market not just as a means of share trading, but as a development partner of the national economy. Prioritizing capital market reform and emphasizing modern financial instruments, investor protection, and market expansion is a very positive aspect.'

The budget includes announcements to restructure the Nepal Stock Exchange (NEPSE) and gradually implement intraday trading, short selling, and derivative instruments. President Sagar Dhakal expressed confidence that these provisions will take Nepal's capital market to new heights. President Dhakal also considered the announcement to amend the legal provisions for allowing non-resident Nepalis to participate in the secondary market as a very important step.

He also welcomed the government's zero-tolerance policy against insider trading and share cornering.

The private sector appears optimistic about the budget for the upcoming fiscal year. The private sector's conclusion is that the budget's goals of economic growth and prosperity will be achieved only if the policies and programs announced by the government and the tax exemption facilities are implemented literally.