The principles and priorities of the budget for the fiscal year 2026-27, presented by Nepal’s Finance Minister Swarnim Wagle, has five main guiding principles at the center: good governance, economic restructuring, infrastructure development, social justice and international relations.

The government has set a goal to move the traditional consumption-oriented economy towards a production and investment-oriented direction, in which special emphasis has been placed on the modernization of information technology and the agricultural sector.

The budget has resolved to improve the living standards of citizens through simplification of service delivery, digital transformation and expansion of the middle class. The government has presented a blueprint for a plan to lay the foundation for employment-oriented growth and sustainable development by addressing the country's existing economic challenges. When the new government was formed at the time of preparing the budget, there was some inconsistency with the Ministry of Finance, but that situation is no longer there.

According to the public record, the process of finalizing the budget moves forward in mid-May. The principles and priorities of the Appropriation Bill must be presented to the Parliament at least 15 days before the budget is presented in the House. The preliminary draft of the expenditure estimate  is prepared by May 20, while the draft is scheduled to be prepared for the budget briefing to the President.

The final draft with the expenditure heading details must be prepared and submitted to the President by May 24.  After this, the finance minister will brief the President on the budget.

The financial bill, appropriation bill and budget statement will be finalized on May 26-27. In the parliamentary history of Nepal, the 'principles and priorities' presented on the eve of budget preparation is not just a constitutional formality, it is also a clear reflection of the government's political philosophy and economic direction for the coming year.

The principles and priorities of the Appropriation Bill for the fiscal year 2026-27, presented in the Federal Parliament, do not merely present the addition and subtraction of traditional figures, but rather seem to carry a bold resolve to 'set the stage' for giving the sluggish Nepali economy a turnaround.

The foundation of this 40-point roadmap is the aspirations of the youth working for change and the unprecedented mandate received from the recent general elections. As the source reference makes clear, this document has been prepared by absorbing the spirit of the ‘Gen-Z’ movement and the search for civil rights. The government has focused its main goal on the following three main pillars: Good governance and justice: It seems that the rule of law and public morality should be guaranteed to the citizens by freeing the state machinery from exploitative tendencies and ‘illegal occupation’. The traditional economy based on consumption should be made investment and production-oriented and sufficient employment should be created.

This budget is not just a government spending plan; it has laid the philosophical foundation for a ‘new phase of economic reform’ that aims to make Nepal a capable, just and prosperous nation. The five guiding principles of the budget presented by the Finance Minister aim to transform Nepal’s current economic structure from the ground up.

The most important feature is a pledge to bring about good governance, defined as ‘moral legitimacy and service efficiency’ felt in the daily lives of citizens. The budget has a plan to transform Nepal’s ‘consumption-based economy’ into ‘investment and production-oriented’.

Infrastructure is seen not only as a means of connecting geography but also as a link to reduce the gap between production, markets and opportunities. It has pledged to increase state investment in education and health for the development of capable human capital. What’s more, the policy document also aims to strengthen Nepal’s presence in the international arena through economic diplomacy and cultural identity.

Nepal’s economy has long been dependent on imports supported by remittances and consumption-oriented revenue generated from them. This vicious cycle of ‘consumption-revenue-consumption’ has crippled domestic production. The proposed ‘investment-oriented’ model claims to encourage production and innovation by simplifying and fairing the tax system.

However, as revolutionary as it sounds to strengthen the ‘social market economy’ by dismantling unhealthy competition, syndicates and monopolies, the main challenge for the government will be to muster the ‘regulatory courage’ required for this.

‘Digital’ leap and implementation challenges

Administrative delays and cumbersome bureaucracy have been the main obstacles to Nepal’s development. To overcome this, the finance minister has made ‘digital good governance’ the main weapon. The government has floated a plan to create an integrated database based on the national identity card for providing all kinds of government services.

Digital governance and the integrated use of the ‘Citizen App’ are expected to reduce the gap between the state and the citizen by integrating services such as citizenship, business registration, tax administration, and social security through the ‘Citizen App’.

Envisioning a modern administration that provides ‘more services with less’, the concept of a ‘Single Service Center’ aims to provide essential services seven days a week. To make the anti-corruption campaign ‘result-oriented’, the government aims to keep a close watch on money-laundering and revenue leakage, apart from maintaining transparency in the asset details and expenditure system of those holding public office.

These concepts of digital governance are excellent. But how is such a radical change possible amidst the uncertainty of the Civil Service Act, the politicization of trade unions in the bureaucracy and the ‘status quo’ mentality? Technology may displace middlemen, but if the ‘hands’ who operate the technology become obstacles to change, this dream risks being limited to a mere ‘code’ of software.

The upcoming budget has put forward the innovative idea of ​​a “weightless high value-creating economy” considering Nepal’s geographical location. Areas such as software, cloud services and AI are on priority, with the apparent objective of reducing the structural economic burden of being landlocked (high transportation costs etc).

Developing Nepal as a regional ‘tech hub’, legalizing ‘digital nomads’ and remote work, and increasing investment in data centers and cybersecurity are other priorities along with the development of ‘production clusters’ instead of traditional subsistence agriculture. The policy document also plans to bring together a humidification center, storage and testing laboratory,  prioritize reservoir-based projects and encourage private investment in ‘green hydrogen’.

Furthermore, an “Investment Express” policy aims to simplify the approval process for industry and infrastructure projects.

The government has introduced the concept of “mission mode” targeting the ‘disease’ of projects never seeing completion despite budget allocation. This means not just budget allocation, but also entering into performance agreements with the project manager and arranging result-based punishments and rewards with a guaranteed fixed tenure.

The government has prioritized unfinished strategic roads such as the Pushpalal Mid-Hill Highway, the Postal Highway, the North-South Corridor and the Kathmandu-Tarai Madhes Expressway. It seems more economically prudent to complete old ‘transformational projects’ than to pursue new ones. Collaboration with the private sector has been emphasized in the construction of tunnels and flyovers. But it is worth remembering that so far, the number of successful projects in Nepal through public-private partnerships is not significant.

Nonetheless, it is expected to reduce the burden on public finances and accelerate the construction of modern infrastructure.

Inclusion to mobility

The stability of any country depends on the size of its middle class. For this, the government has brought a plan to invest in ‘human capital’. It has pledged to make the education system ‘free from political interference’ and to link education with the labor market through the ‘earning and learning’ concept. A policy is in place to transform Karnali, Madhesh and Sudurpaschim, which are deprived of the mainstream of development, from ‘grant-dependent’ areas to ‘strategic economic centers’ by focusing on their national potential, water resources and culture.

Additionally, a National Research and Innovation Fund, restructuring of health insurance, arrangements for ensuring quality service and citizen-friendly access, housing and land ownership for Dalits, marginalized and landless are also on priority, with the idea of linking it with production. 

The aim is to transform the traditional ‘representative inclusion’ into ‘inclusion of economic opportunity’. The budget has pointed out that Nepal’s foreign policy should now focus on ‘economic diplomacy’ rather than limiting itself to political relations alone. The plan to mobilize the skills and capital of Nepalis living abroad for national development through ‘diaspora partnerships’ is strategically important. The plan to expand access to climate finance and introduce Nepal to the world as an attractive hub for green energy will strengthen Nepal’s clean power. The development of energy trade and tourism circuits (Lumbini-Buddha, Janakpur-Ramayana) with neighboring countries will give a new height to regional proximity.

Challenges aplenty

These principles and priorities seem very excellent and contemporary in the context of modern economics. The journey from a ‘consumption-oriented’ to a ‘production-oriented’ economy and the concept of a ‘weightless economy’ have tried to take the Nepali economy to a suitable framework for the 21st century.

However, in the eyes of analysts, two big challenges have always obstructed the realization of these dreams: the lack of administrative will and political instability. A major surgery is required in the current structure of the bureaucracy and the work culture to implement the ‘mission mode’ as mentioned in the 40-point roadmap. The concrete steps taken by the government to resolve the crisis in the cooperative sector and restore the trust of savers will test the 'good governance' of this budget.

If these principles are honestly implemented in the upcoming budget allocation and concepts like ‘Investment Express’ truly gain momentum, it will set a historic starting point toward changing the structure of the Nepali economy. The path it points is the right one, but its success will depend on the government’s commitment to implementation and the determination to dismantle the ‘syndicate’.

To reduce current spending in the national budget, the government can implement a combination of strategies focused on reducing spending and increasing efficiency. These include cutting discretionary spending, streamlining public services, increasing tax revenues and improving debt management.

Discretionary spending areas (such as defense, foreign aid or certain infrastructure projects) need to be identified where essential services are not being provided.