KATHMANDU: Nepal News presents today’s snapshot of Nepal’s economic activities. Get quick updates on major market movements, policy shifts, and financial developments shaping the economy of Nepal. Here are the key economic highlights for today:

Government Planning Free Education and Healthcare for the Poor, Says Prime Minister Shah

Prime Minister Balendra Shah has said the government is working on a plan to provide free education and healthcare services to economically disadvantaged citizens. Responding to lawmakers’ questions during a meeting of the House of Representatives on Sunday, Prime Minister Shah outlined the government’s approach toward supporting low-income groups. Answering a question from Nepali Communist Party (NCP) lawmaker Pramesh Hamal, Shah said Nepal must also pay close attention to issues such as the loss of tariff exemptions on exports and other trade-related benefits as the country prepares to graduate to developing-country status. He said the government had proposed delaying the graduation by a few years, arguing that Nepal should first strengthen its export capacity.

Finance Minister Wagle Defends Rs 2.124 Trillion Budget as Realistic

Dismissing market rumors of an oversized fiscal plan, Finance Minister Dr. Swarnim Wagle announced a disciplined budget of Rs 2.124 trillion for the fiscal year 2026/27. Speaking at a press conference at the Ministry of Finance on Sunday, Dr. Wagle emphasized that this budget represents a shift toward fiscal consolidation, accounting for only 28.5% of the projected Rs 7.458 trillion Gross Domestic Product (GDP). He noted that this breaks the historical trend where budget sizes peaked at up to 37% of GDP, aligning government spending with the state’s actual financial capacity.

Nepal’s Public Debt Burden Continues to Rise

Nepal’s widening budget deficit and growing recurrent expenditure are placing increasing pressure on public debt obligations. Not only is the government’s debt stock rising, but spending on principal and interest repayments is also increasing sharply, creating new challenges for public financial management. In fiscal year 2026/27, Nepal’s total public debt liability is expected to exceed Rs 3.4 trillion. The government plans to mobilize Rs 657 billion in public debt while allocating Rs 318 billion for debt repayment during the fiscal year.

Nepal Railways Continues to Suffer Financial Losses Despite Expansion Plans

Despite government plans to expand the railway network and connect it to the Fast Track, Nepal Railways Company Limited continues to incur heavy financial losses due to inadequate infrastructure and overreliance on ticket sales. A report by Nepal Rastra Bank’s Economic Activity Study and Annual Report 2024/25 for Madhesh Province states that operating expenses consistently exceed revenue, pushing the railway further into deficit. The report highlights the urgent need for maintenance centers, workshops, fuel storage facilities, washing bays, signaling systems, and skilled technical manpower to ensure the sustainable operation of the Jayanagar–Kurtha–Bijalpura service.

New VAT on Electricity Consumption Above 50 Units May Burden Households

The government’s decision to impose Value Added Tax (VAT) on monthly electricity consumption exceeding 50 units is expected to affect a large number of household consumers. The new provision introduces a five percent VAT on electricity bills for households consuming more than 50 units per month. Critics argue that the measure could discourage the growing adoption of electrical appliances and undermine efforts to increase domestic electricity consumption. Through Clause 55 of the Finance Bill presented in Parliament, Finance Minister Dr. Swarnim Wagle proposed amending the VAT Act to authorize the collection of a five percent tax from end consumers on taxable electricity consumption.

Budget Backs New Road Tunnels as Nepal Expands Underground Infrastructure

Three tunnels are currently under construction at Lendanda, Dhedre, and Mahadevtar along the Kathmandu–Terai/Madhes Expressway. Additional tunnel works are underway at Devichaur, Sisautar, and Chandrambhir. As tunnel road construction gains momentum across the country, Finance Minister Dr. Swarnim Wagle announced in the new budget that additional tunnel projects will be pursued in the coming fiscal year. The government had previously allocated funds for the Lamabagar and Dharan–Leuti tunnels in the 2021/22 budget. Discussions have also been held regarding the proposed Majhimtar–Shaktikhor–Jogimara tunnel road.

Capital Gains Tax Hike Overshadows Market Reform Measures

Although the budget for fiscal year 2026/27 introduces new financial instruments and plans to expand institutional investment in Nepal’s capital market, investors remain concerned about the increase in capital gains tax. While presenting the budget, Finance Minister Dr. Swarnim Wagle announced measures including facilitating investment by Non-Resident Nepalis (NRNs), introducing derivative trading, and restructuring the Nepal Stock Exchange (NEPSE). However, investors, brokers, and market analysts argue that the increase in capital gains tax makes the budget more revenue-oriented than investor-friendly.

Budget Fails to Address Longstanding Problems in Agricultural Insurance

The budget for the upcoming fiscal year has once again failed to offer a solution to the persistent problems plaguing Nepal’s agricultural insurance sector. Instead, the government has reduced the budget allocated for premium subsidies compared to the current fiscal year and has remained silent on plans to reform and modernize the system. “The government will continue providing up to 80 percent premium subsidies in crop and livestock insurance while gradually phasing out other subsidies,” the budget states. However, the Subsidy Guidelines for Crop and Livestock Insurance were already revised in October 2024.

Government Raises Annual Taxes on Commercial Vehicles

The government has significantly increased annual income tax rates on various categories of vehicles used for commercial transport. The revised tax structure, payable during vehicle registration or renewal through transport management offices, raises operating costs for public and commercial transport operators. Taxes on vehicles ranging from small cars to large and electric vehicles have increased by Rs 1,000 to Rs 2,500. Under the new rates, the annual tax on cars, jeeps, vans, and microbuses with engine capacities of up to 1,300cc has increased from Rs 5,500 to Rs 6,500.

Real Estate Entrepreneurs Seek Policy Reforms to Revive Property Sector

Nepal Land and Housing Developers’ Association has called for policy reforms and facilitation measures to revitalize Nepal’s struggling real estate sector. Association’s 19th annual general meeting highlighted the challenges facing the housing and land development industry and urged the government to adopt supportive policies. Association says unclear government policies have pushed many real estate developers into crisis while making housing less accessible to ordinary citizens.

Smuggled Synthetic Fabrics Undercut Nepal’s Textile Market

India imposes only a 5 percent Goods and Services Tax (GST) on cotton garments, and that tax is waived when such products are imported into Nepal under the South Asian Free Trade Area (SAFTA) agreement. However, customs duties and VAT in Nepal create a significant price gap in border markets, encouraging garment smuggling and hurting local businesses. Industry representatives claim that high taxes have made synthetic fabrics the preferred choice for illegal imports from India. Nepal currently levies a 15 percent customs duty and VAT on synthetic textile imports.

Over 4,300 Apply for Vacant Posts Under Tourism Ministry Roster

More than 4,300 applicants have registered in a roster system established to fill vacant positions across 17 agencies under the Ministry of Culture, Tourism and Civil Aviation. The ministry invited applications on May 14 for appointments, nominations, and recruitment to vacant posts in various authorities, corporations, funds, committees, and councils under its jurisdiction. According to the ministry, 4,348 people applied, including 3,414 men, 921 women, and 13 applicants identifying outside the gender binary. Four applicants have already been appointed as board members of Nepal Airlines Corporation, while one has been appointed Director General of the Civil Aviation Authority of Nepal.

Government to Build Budhigandaki Hydropower Project Under Authority Model

The government has announced that the 1,200-megawatt Budhigandaki Hydropower Project will be developed under an autonomous authority model.  “The construction of the 1,200MW Budhigandaki storage project will move forward under an empowered authority structure,” the budget states. It also commits to completing the financial closure of the 670MW Dudhkoshi storage project and initiating the tender process. The government further pledged to facilitate the development of nearly 3,000MW of hydropower projects being advanced through the Investment Board Nepal, including the 900MW Arun III and the 669MW Lower Arun projects.

Construction Material Shortage Slows Dhulikhel–Khawa Road Upgrade

Although upgrading and blacktopping work on the Dhulikhel–Khawa section of the Arniko Highway has reached its final stage, recent shortages of construction materials have slowed progress. Residents and travelers, who have long endured dust, mud, and traffic congestion, are eagerly awaiting the project’s completion. However, construction activity has noticeably slowed in recent weeks. According to the Bhaktapur Road Division Office, blacktopping work began from the Dhulikhel junction and is gradually progressing despite supply constraints.

Lumbini Residents Welcome Budget Focus on Siddhababa Tunnel Project

The federal budget for fiscal year 2026/27 has prioritized key road, irrigation, tourism, industrial, and energy projects in Lumbini Province. Residents have particularly welcomed the government’s commitment to complete the long-awaited Siddhababa Tunnel within the current fiscal year. The Siddhababa section has long been notorious for landslides and travel disruptions. Once operational, the tunnel is expected to make travel along the Butwal–Palpa–Pokhara corridor safer and more reliable. The budget also states that the Butwal–Pokhara section of the Siddhartha Highway will be developed as an expressway.

Koshi Province to Prioritize Results-Oriented Budgeting

The Koshi Province government plans to introduce a results-oriented budget for fiscal year 2026/27 by reducing distribution-focused programs. Economic Affairs and Planning Minister Bidur Lingthep informed the provincial assembly that the upcoming budget will emphasize measurable outcomes rather than scattered subsidy-based initiatives. The province plans to increase investment in agriculture, industry, tourism, infrastructure, health, and education while prioritizing production growth, employment generation, economic expansion, and the completion of unfinished projects.

CBFIN Asserts FY 2026/27 Budget Will Stimulate Economy

The Confederation of Banks and Financial Institutions Nepal (CBFIN) has stated that the budget unveiled for the fiscal year 2026/27 will effectively stimulate the national economy. According to the confederation, the policy-driven and structural reform initiatives introduced in the budget are a step in the right direction toward economic revival, boosting private sector morale, promoting investment, and building a production-oriented economy. In an official press release, CBFIN highlighted the current challenging economic backdrop that the new fiscal policies aim to address.

Gold Price Jumps by Rs 20,500 Per Tola

The price of gold in Nepal has surged sharply in the domestic market, rising by Rs 20,500 per tola (11.66 grams), according to the Federation of Nepal Gold and Silver Dealers’ Association. Gold is now being traded at Rs 311,100 per tola, up from Rs 290,600 recorded on Friday, marking a significant spike in the precious metal’s price.