KATHMANDU, Jan 31: Weak capital expenditure and mounting pressure on revenue collection marked the government’s fiscal performance in the second quarter of the current fiscal year. According to a report released by the Ministry of Finance, capital spending stood at only 11.66 percent of the allocated amount of Rs 408 billion while revenue fell short of the mid-year target by nearly Rs 130 billion.
As of mid-January, the capital expenditure was just Rs 47.54 billion, when the government’s overall expenditure stood at 46.06 percent of the annual budget, an increase of 10.75 percentage points compared to the same period last fiscal year. Of the total budget of Rs 1.964 trillion for Fiscal Year 2025/26, spending stood at Rs 904.6 billion.
Meanwhile, the government’s recurrent expenditure reached 40.82 percent, with Rs 482 billion spent out of the earmarked amount of Rs 1.181 trillion.
Compared to the same period last year, recurrent expenditure increased by 3.35 percent, while capital spending declined by 4.86 percent. Expenditure under financial management, including financial obligations, rose sharply by 53.29 percent, the report shows.
Revenue mobilization also remained under strain. Against an annual target of Rs 1.440 trillion, the government collected only Rs 581 billion by mid-January—Rs 129.8 billion below the mid-year target of Rs 711 billion.
Provinces fare worse in budget expenditure, spend only 49 perce...
Election-related spending featured prominently during the review period.
The government has disbursed a budget of more than Rs 19 billion for the upcoming House of Representatives (HoR) election scheduled for March 5.
Officials at the Ministry of Finance (MoF) confirmed that the ministry has managed Rs 19.21 billion for the poll. Tanka Prasad Pandey, spokesperson for the MoF, said the largest amount has been provided to the Ministry of Home Affairs for security expenses.
As of now, the MoF has released Rs 10.39 billion for security expenses which is 54 percent more than the amount provided to the Election Commission (EC). The EC has received Rs 6.73 billion, while the Ministry of Defence has been provided with Rs 1.99 billion.
Funds totaling Rs 43.18 million for the National Assembly election were also approved and fully disbursed.
Under revenue administration reforms, the ministry rolled out online valuation systems to ensure full compliance with the ‘GAT Valuation’ mechanism across customs offices. It also addressed disputes under the Nepal–Mauritius Double Taxation Avoidance Agreement, including issues related to capital gains tax on the Dolma Impact Fund. The bilateral tax agreement with Mauritius was later annulled, and arrangements under the pre-2058 Income Tax Act were communicated through diplomatic channels.
The Customs Act, 2082 has come into force, while the draft Customs Rules, 2082 have been submitted for legal approval. The ministry held regular meetings of the Central Revenue Leakage Control Committee and operationalized a grievance management system for public service delivery, including through Hello Sarkar. Non-tax revenue rates were revised, postage stamps were replaced with receipts, and capital gains tax exemptions were granted for land transfers related to Ramkumar Sharda Umaprasad Hospital in Siraha.
On fiscal federalism, the ministry circulated guidelines for implementing the Third National Public Financial Management Reform Strategy across federal, provincial and local governments. Several legal reforms—including the Alternative Development Finance Mobilization Act, 2081, amendments to the Payment and Clearance Act, Customs Rules, Financial Procedures and Accountability Regulations, multi-year project funding guidelines and asset cleansing regulations—were published in the Nepal Gazette.
During the review period, the ministry responded to 58 writ petitions, issued tax-related notifications under the Millennium Challenge Corporation (MCC) Compact, clarified foreign exchange and cash transaction limits, and implemented 26 court verdicts. Decisions aimed at curbing unproductive expenditure, prioritizing projects and enforcing resolutions of the Intergovernmental Finance Council were also communicated to local governments.
Financial sector initiatives included restrictions on cash transactions above Rs 500, revisions to limits on Indian currency movement, restructuring of the Nepal Stock Exchange, and the release of Rs 9.8 billion for subsidized loan programs. Over the past six months, 91 grievances lodged through Hello Sarkar were addressed, 323 staff positions were reduced—saving Rs 22 million, the ministry officials stated.
