Kathmandu, Apr. 24
Weak governance, reduced
private sector confidence, weak manufacturing, growing unemployment and
procedural hurdles should be the fundamental aspects the upcoming budget of the
Fiscal Year 2026/27 should address, said economists and investors.
Speaking at the
pre-budget discussion programme organised by the Management Association of
Nepal (MAN) in Kathmandu on Friday, they said that the process should
facilitate the business and industry while the government should be clear on
the treatment of entrepreneurs.
Dr. Baikuntha Aryal,
former Chief Secretary, said that infrastructure development, governance
reform, human resource development and upskilling, and improving the investment
environment should be the priority of the upcoming budget.
He informed that for
the past several years, the federal government has failed to meet the 80 per
cent mark in mobilising the development budget. The weak government spending
has resulted in poor private sector investment and revenue mobilization.
"Hope is
rekindled with the formation of stable government which has initiated a process
to include the crucial pledges from the manifestos of the major political
parties, annul the restrictive 15 laws and improve governance," he said
while adding that single tax code and simplified tax process with
investor-friendly tax administration will help to increase the revenue.
According to him, the
budget allocating system should be changed to global budgeting or agency
budgeting. The Finance Ministry shouldn't allocate budget directly to the
projects.
Project readiness
filter should be made mandatory. This filter was announced a decade ago but
rarely implemented. All the projects should be harmonized with the current
periodic plan (5-year) and mid-term expenditure framework (3-year), said Dr.
Aryal.
He suggested that the
government should run corporations only producing goods and services, own only
one bank while private investment should be invited in all other public
enterprises.
Dr. Ramesh Chandra
Poudel, former Member of the NPC, said that the entire government mechanism including
the institutions and bureaucracy has remained inefficient, so if the current
government couldn't make it efficient, desired results can't be achieved.
Paradigm shift is
needed in health and education sector to give greater emphasis to social
development.
Businesspeople mustn't
be handcuffed until proven guilty, the tendency to arrest them, take to the
court and releasing afterwards will be counterproductive.
Chartered Accountant
Sudarshan Raj Pandey said that the share of capital budget is just about 12-15
per cent of the total budget and the country has been failing to mobilise even
this small amount. This has impacted the overall development of infrastructure
and other projects.
"We have excess
liquidity now so the government can issue long-term bond to raise money to
expedite development projects that have remained sluggish due to shortage of
sufficient funds," he said.
According to Pandey, removal
of education and health services tax has compromised the transparency in these
sectors. The 1 per cent tax on these services had not increased the cost of
business but the interest groups influenced the political leadership and
succeeded in repealing the provisions. Such practice should be discouraged, he
said.
He also said that multiple
VAT (Value Added Tax) rates - as advocated by some economists and financial
experts - can be an accounting nuisance. This will create challenges in its
implementation, compliance and supervision.
Former Finance
Minister and former Governor of the Nepal Rastra Bank, Dr. Yuba Raj Khatiwada,
said that although it sounds cliché, the tax base needs
to be expanded and tax rates should be moderated.
"However, there is a threshold below
which tax rates should not fall; otherwise, it leads to the flawed assumption
that setting taxes to zero would generate higher revenue," he said.
Dr. Khatiwada said when efforts were made
to bring lawyers into the income tax net, they resisted, saying they would not
plead cases and would halt court proceedings. While doctors and engineers have
been brought within the tax system, lawyers have yet to be effectively included.
Commenting on
cross-border smuggling of goods, he maintained that those
who cross the border multiple times a day to bring in goods should not be given
even a one-rupee exemption, let alone a Rs. 100.
"If air travellers are allowed baggage
concessions, similar facilities should also be extended to those travelling to
India by land. Proper records of entries and exits should be maintained,"
said Dr. Khatiwada.
Published in The Rising Nepal daily on 25 April 2026.
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