Nepal Budget Highlights (2022-23)- Focused On Worsening Economic Indicators Or The Election?

For the fiscal year 2022-23, the Government of Nepal (GoN) proposed a budget of NPR 1.793 trillion (USD 14.7 billion). The International Monetary Fund (IMF) projects the economy to grow by 4.1 percent in the current fiscal year.

Nepal has reduced the existing minimum threshold of paid-up share capital for Foreign Direct Investment to NRS. 2 Crores (USD 165,000) from NRS. 5 Crores (USD 400,000). Moreover, the government has come forward to make provisions to allow the leasing of land for up to 50 years and the government has initiated the arrangements to sell apartments to the foreigners which shows the intent of the government to attract more foreign investment in Nepal. Coming forward, the window period for getting the approval of the foreign investment above NRS. 10 Crores (USD 800,000) is reduced to 7 days. For encouraging foreign investment, the government also plans to establish a hedge fund to mitigate the risk of foreign exchange fluctuations. 

The budget seemed to be highly focused on the benefits to general people looking into the upcoming parliamentary election in Nov-Dec 2022. The basic exemption limit of tax for natural persons has been increased to NPR.500,000/NPR. 600,000. Other deductible limits of medical and insurance credit have been revised. The government is set to introduce the “Kisan Pension Scheme” which is like the retirement plan- provident fund or pension find.

The government has announced to deposit 10% of the amount deposited by the farmers in the fund to increase the savings and retirement plan of the people engaged in subsidized agriculture sector where most of the population belongs. The government has also committed to paying up to 80% of the agriculture insurance. 

The budget is aligned with the current economic scenarios of Nepal. The budget aims to reduce the imports and improve the balance of payment which is worsening each year. Government offices are being encouraged to use domestic products. The budget plans to reduce the import of food and vegetables by 30% and introduce modern warehouses across the country to preserve the food produced within Nepal. The budget commits up to 8% cash subsidies to the export of cement, steel, footwear, and treated water products which are one of the major manufactured products in Nepal. Also, the government aims to set up the green ammonia-based fertilizers factories within the country citing the huge import of fertilizers in previous years. The government has been focusing on the use of electric mobility. This budget has introduced a tax deduction of 40% for 5 years to the electric vehicle assembling factory. Several benefits and concessions are given to electric vehicles as the government wants to lower the import of fossil fuels.

Concluding, the budget is balanced and focuses on the demands of the general people at large. The focus of government in “Going Green” is highly appreciable. But managing the sources of funds is always a challenge for Nepal. 30.9% of the budget is aimed to be raised through grants, and foreign and internal loans. 21.2% of the budget is planned to be invested in the capital expenditure which is significantly low to achieve the growth target set by the government. 

Disclaimer: The author is a regular reader of our news, and to the best of the author's knowledge, this article is accurate and true.

CA Bimal Dhungel

bimal.dhungel258@gmail.com