KATHMANDU: On May 29, Finance Minister Dr. Swarnim Wagle delivered an unprecedented fiscal blueprint to a joint session of the Federal Parliament.

Facing sluggish domestic investment, high administrative overheads, and a private sector weighed down by regulatory red tape, the government unveiled a record-breaking budget outlay of Rs 2,124.34 billion (approximately Rs 2.124 trillion) for Fiscal Year 2026/27.

This represents a massive 25.2% expansion over the current year’s revised spending estimates, making it the most ambitious and transformative economic roadmap in the nation’s history.

The budget seeks to engineer a structural shift in Nepal’s economy.

Moving away from a decade of policy inertia and unstable political compromises, Dr. Wagle has framed this plan as a decisive leap toward productive governance.

By leveraging aggressive middle-class tax relief, sweeping regulatory rollbacks, a massive tech-hub and Artificial Intelligence infrastructure rollout, and bold privatizations of underperforming state assets, the fiscal policy aims to kickstart a high-growth era.

Crucially, the government is also making the calculated geopolitical move to delay its UN Least Developed Country (LDC) graduation by two years, preserving vital trade protections while the economy stabilizes.

1. The government finalized the total budget size for FY 2026/27 at an absolute historical high of Rs 2,124.34 billion.

2. This historic allocation represents a massive 25.2% expansion over the current year’s revised spending estimates.

3. Current operational and administrative costs consume the largest share of the package, set at Rs 1,270.58 billion (59.8% of the total layout).

4. Funds earmarked for actual capital infrastructure development stand at Rs 431.10 billion, representing 20.3% of the overarching budget.

5. Financial management—covering state lending operations and mounting public debt repayment—accounts for Rs 422.64 billion (19.9%).

6. The state has locked in a target of achieving a 7% economic growth rate for the upcoming fiscal year.

7. Consumer price inflation is legally mandated to be contained within a strict upper threshold of 6%.

8. The government aims to collect Rs 1,405.31 billion directly through domestic tax and non-tax mechanisms.

9. The spending plan factors in Rs 61.74 billion in incoming foreign grants, creating a total initial revenue pool that still leaves a deficit of Rs 657.29 billion.

10. To close the gap, the state will secure Rs 247.28 billion in external loans and Rs 410 billion in domestic debt. Due to Rs 245.89 billion in existing domestic debt maturing this year, the net new internal borrowing injection is capped at Rs 164.11 billion.

11. The personal income tax exemption limit has been completely doubled to Rs 1 million per year.

12. The top marginal personal income tax bracket has been lowered by a substantial 10 percentage points.

13. Customs duties on 273 categories of industrial raw materials have been slashed to ensure they sit at least one tier below imported finished goods.

14. Nepal’s highly complex 11-tier customs duty collection framework has been compressed into just 7 uniform tiers.

15. Excise duty has been completely eliminated across 360 separate product categories to boost manufacturing.

16. Fragmented border-point taxes, including road maintenance fees and pre-infrastructure development taxes, are officially merged into a singular “green levy.”

17. Capital gains tax collected on listed stock market securities has been made final, fully removing the need for secondary settlements.

18. An automated, single-window online platform will launch within 90 days to unify company registrations, tax tracking, banking, and visas.

19. Projects formally vetted and approved by the Investment Board of Nepal will no longer require secondary clearances from line ministries.

20. Foreign investors gain long-term lease privileges for up to 25% of apartment units within designated commercial buildings.

21. Dedicated commercial tribunals and modern legal frameworks are being drafted for fast-tracked debt recovery and intellectual property protection.

22. Backed by an Rs 85.54 billion grid budget, the state plans to add 1,040 megawatts (670 MW hydro, 370 MW solar) to drive Nepal’s total generation to 5,535 MW.

23. A separate, ring-fenced fund of Rs 70 billion has been explicitly allocated to build high-voltage transmission corridors.

24. The state-owned monopoly, the Nepal Electricity Authority (NEA), will be legally broken up into three fully unbundled entities: generation, transmission, and distribution.

25. The massive 1,200 MW Budhigandaki storage project will transition into active construction under an empowered, independent authority model.

26. For the first time, private enterprises are legally permitted to trade and export electricity internationally on a “take or pay” contract structure.

27. Transport and urban infrastructure development secured the largest single-sector share of the budget at Rs 286.48 billion.

28. Rs 37.46 billion is dedicated to expanding the 1,028-kilometer East-West Highway into a high-speed four-lane corridor within five years.

29. The Kathmandu-Tarai/Madhesh Fast Track receives Rs 17.64 billion to complete 40 bridges and 5.4 kilometers of deep tunnels this fiscal year.

30. The strategic Nagdhunga tunnel connecting the western gateway into Kathmandu Valley is officially scheduled to open to the public in July 2026.

31. The state will construct Nepal’s first “Sovereign AI Computing Center” in Kathmandu, utilizing domestic hydropower to run thousands of concessional graphics processing units (GPUs) for local tech startups.

32. Fifteen internationally recognized Nepali Artificial Intelligence researchers will be offered prestigious state-backed fellowships to return and lead local projects.

33. Part of Nepal’s foreign exchange reserves will be deployed into a specialized fund to bankroll an “AI factory” and core digital assets.

34. The state will execute a public share divestment of Nepal Telecom by mid-January 2027 while legally preserving a controlling 66% government stake.

35. IT service companies exporting digital products will receive a 50% income tax exemption, and employee sweat equity is declared fully tax-free.

36. Ending a four-year wage freeze, the government lifted base salaries for civil servants, military, police, and teachers by 10%, plus a new 10% monthly performance allowance—raising total take-home pay by roughly 21%.

37. Out of an Rs 101.95 billion health budget, Rs 15 billion is bound to restructuring the state insurance program into a single-payer model to shield 90% of citizens within three years.

38. Night duty allowances for nursing staff are doubled, and transport stipends for female community health volunteers (FCHVs) are raised by 50%.

39. Out of an Rs 120 billion social protection budget, monthly child nutrition stipends for vulnerable Dalit families in 25 high-poverty districts will double to Rs 1,000.

40. In an unusually candid policy decision, the government has moved to voluntarily delay Nepal’s official UN graduation from Least Developed Country (LDC) status by two additional years to protect critical international trade preferences and export quotas.