Nepal’s Economy Expands 3.85% in FY 2082/83 as Capital Spending Hits Five-Year Low

Nepal’s economy expanded by 3.85% in Fiscal Year (FY) 2082/83, while government capital expenditure fell to its lowest level in the past five fiscal years, according to the annual economic bulletin published by the Ministry of Finance.

Nepal’s Gross Domestic Product (GDP) reached Rs. 66 kharba during the review year. However, economic growth slowed from 4.43% in FY 2081/82 and remained below the 10-year average growth rate of 4.53%.

Consumer price inflation moderated during the review year, with average inflation standing at 3.07%, down from 4.06% a year earlier.

Average inflation in the food and beverage group stood at 1.04%, while prices of non-food goods and services increased by 4.21%. Annual average wholesale inflation stood at 4.27%.

Remittance inflows increased significantly during the review period. Remittance inflows rose 37.1% to Rs. 23 kharba 63 arba, equivalent to 35.8% of GDP.

Meanwhile, the country’s foreign exchange reserves increased 45.6% to Rs. 38 kharba 98 arba, equivalent to 59.1% of GDP.

Per capita GDP reached US$1,513, while per capita Gross National Disposable Income stood at US$2,044, according to the bulletin.

Nepal’s external sector remained in surplus during the review year. The current account recorded a surplus of Rs. 9 kharba 23 arba 60 crore, equivalent to 13.99% of GDP.

Similarly, the balance of payments recorded a surplus of Rs. 10 kharba 27 arba.

Merchandise exports stood at Rs. 3 kharba 15 arba, while imports reached Rs. 20 kharba 96 arba. As imports significantly exceeded exports, the merchandise trade deficit stood at Rs. 17 kharba 81 arba.

The federal government collected Rs. 12 kharba 41 arba 33 crore in revenue during FY 2025/26, marking a 5.21% increase from the previous fiscal year.

Meanwhile, total federal government expenditure reached Rs. 15 kharba 61 arba 42 crore, up 3.18% year-on-year.

Of the total expenditure, recurrent expenditure stood at Rs. 10 kharba 15 arba 69 crore, while capital expenditure amounted to just Rs. 1 kharba 91 arba 88 crore. Financial management expenditure stood at Rs. 3 kharba 53 arba 85 crore.

Nepal’s outstanding net public debt reached Rs. 29 kharba 81 arba 70 crore, equivalent to 45.18% of GDP.

Of the total public debt, domestic debt stood at Rs. 13 kharba 75 arba 42 crore, while external debt amounted to Rs. 16 kharba 6 arba 29 crore.

Public debt had stood at 43.13% of GDP in the previous fiscal year, indicating a rise in the debt-to-GDP ratio during the review period.

The government utilized only 47.04% of its allocated capital budget in FY 2025/26, the lowest capital budget utilization rate in the past five fiscal years.

Overall, the government spent 79.50% of the total allocated budget. Capital expenditure utilization had averaged 58.5% over the previous five fiscal years, making the latest performance significantly weaker.

The low utilization of capital expenditure highlights continued challenges in implementing infrastructure and development projects and effectively mobilizing allocated development funds.

The government’s budget deficit narrowed to Rs. 3 kharba 20 arba 9 crore during FY 2025/26, equivalent to 4.85% of GDP.

The deficit stood at Rs. 3 kharba 33 arba 43 crore, or 5.38% of GDP, in the previous fiscal year.

Although the budget deficit declined both in absolute terms and as a share of GDP, the slower economic growth, weak capital expenditure, and rising public debt ratio continue to pose challenges for Nepal’s fiscal management.