Nepal's Budget: Promising Reforms, Missing Strategy

With a gross domestic product of about Rs 6.6 trillion, Nepal's finance minister has presented a budget of Rs 2.12 trillion for fiscal year 2083/84, roughly the same size relative to the economy as in recent years. At about 32 percent of GDP, the budget is not small for a lower-middle-income country. The issue, therefore, is not primarily the size of the state but how public resources are allocated.Of the total budget, only Rs 431 billion—about 20 percent of the budget and 6 percent of GDP—is allocated to capital expenditure. The remaining four-fifths goes toward recurrent spending and financial obligations, including salaries, pensions, grants, subsidies, debt service, administration, and the operation of essential public services.