Nepal Weekly - 2026-06-03

Jun 03, 2026

Nepal business, finance and trade news, every Wednesday.

Two women carrying baskets through lush green fields. — Photo by UC Berkeley, Department of Geography on Unsplash

Big Numbers and Small Print

Finance Minister Swarnim Wagle put forward a budget of almost $14 billion on May 29. That’s the biggest ever in Nepal's history and about a quarter fatter than this year's revised spending. The $4.3 billion deficit will be covered with foreign loans and domestic borrowing. Some of the headline relief is real. The income tax exemption threshold doubles to Rs 1 million ($6,600) a year, and the top marginal rate is going down 10 percentage points. The catch is in the EV section, where Wagle scrapped the old motor peak-power tax and replaced it with a Clean Infrastructure Investment Fee based on customs value - 2.5 percent on cheaper models, 130 percent on anything above Rs 5 million ($33,000). Dealers say entry-level electric cars are going to cost about Rs 100,000 ($660) more as a result. High-end models could go up by more than Rs 10 million ($66,000). NEPSE greeted the package with a 26-point drop on June 1, as 233 companies fell against 35 gainers. Civil servants did well. Their pay will rise by Rs 75 billion ($493 million) to Rs 242 billion ($1.6 billion) - a 21 percent increase that will eat a larger share of a recurrent spending bill that’s already taking up 60 percent of total outlays.

Read more: Nepal News (budget allocation breakdown), myRepublica (EV tax rates), The Kathmandu Post (industry dissent), myRepublica (income tax slabs), myRepublica (NEPSE trading)

Balen Drags Britain Into Border Row

Speaking off the cuff in his first parliamentary Q&A on May 31, PM Balendra Shah said something no Nepali head of government had said before - that Nepal has also encroached on Indian territory in several places. The encroachment line lit the fuse, but Shah had already pulled a second pin by saying that Kathmandu had raised the Kalapani-Lipulekh-Limpiyadhura dispute not only with India and China, but also with London, on the logic that Britain drew the lines when it left in 1816 and should help fix them. India's MEA spokesperson Randhir Jaiswal shut that door quickly, saying there was "no role for any third party." British Ambassador Rob Fenn had told Shah's chief adviser, Kumar Byanjankar, much the same thing, though we presume in a more diplomatic fashion. The Foreign Ministry spent the rest of the week saying Shah had only meant cross-border cultivation in the Dasgaja no-man's-land - a clarification the opposition said is a cover-up.

Read more: Ratopati (India's bilateral stance), The Hindu (parliament uproar), Thewire IN (UK mediation request), Theprint IN (China involvement call), Desh Sanchar (UML resignation demand)

Rights Body Names Oli, Fingers Lamichhane

Nepal's National Human Rights Commission has recommended criminal charges and a five-year political ban against former PM K.P. Sharma Oli, ex-Home Minister Ramesh Lekhak, and ex-Communications Minister Prithvi Subba Gurung over the September 2025 crackdown that killed at least 76 protesters. The report, given to the government Wednesday, doesn’t leave the current ruling coalition unscathed. It recommends investigating 17 RSP lawmakers, including party chair Rabi Lamichhane, who allegedly used a violent mob to pressure a jail administrator into releasing him during the chaos. The commission also gave a formal warning to the Nepali Army for failing to protect parliament and the president's residence. It also cleared current PM Balendra Shah - then Kathmandu's mayor - of complicity. The government has three months to report back on what it plans to do.

Mayor-Turned-PM Gives Himself 48 Jobs

PM Balendra Shah's cabinet restructuring collapsed 22 ministries into 18 and gave his own office 48 separate responsibilities - national security, anti-corruption coordination, and oversight of the National Investigation Department among them (the NID previously sat under Home). Cybersecurity, data governance, and AI policy are on the PMO’s docket too, along with IT functions pulled from the Communications Ministry. The power consolidation further extends into the civil service. On May 13, MoFAGA gave a directive that threatens dismissal of civil servants for party involvement, and a revised Federal Civil Service Bill now circulating would force one-time mandatory retirement for anyone who is 55 years old or who has 30 years of service under his belt when the law comes into effect.

Read more: Spotlight Nepal (ministry task counts), myRepublica (civil servant gag order), The Kathmandu Post (forced retirement)

Washington's Charm Offensive Meets Kathmandu's Local-Ownership Rule

Sarah B. Rogers, the third senior US official to visit since the Shah government took office in March, got to Kathmandu on Saturday night talking up the $550 million MCC Compact and addressing the 1,400-strong Ascent Summit on adventure tourism and tech. Assistant Secretary Paul Kapur came in April, Trump envoy Sergio Gor followed ten days later, and Deputy Secretary Allison Hooker called Foreign Minister Shisir Khanal by phone last Thursday. The PM met none of them. Starlink's director Rebecca Hunter was also in town, telling Communications Minister Bikram Timilsina that the license needed to be 100 percent Starlink-owned. The minister said she hopes to follow Nepali law.

Read more: Spotlight Nepal (Rogers MCC emphasis), Spotlight Nepal (Timilsina), The Kathmandu Post (visit timeline), The Kathmandu Post (Starlink ownership block)

Big Budgets Hampered by Empty Wallets

With 45 days left in the fiscal year, the government has spent nearly two-thirds of its Rs 1.964 trillion ($12.9 billion) budget and capital spending is where the spending really shows up. Only Rs 123 billion ($810 million) of the Rs 407 billion ($2.7 billion) development money set aside has so far gone out the door, a 30% execution rate. That is not a bad year; it is the decade. Finance Ministry figures show budgets averaged 33.7% of GDP over ten years while spending averaged only 26.8%, and growth slowed to 4.1% a year in the five years after Covid even as annual budgets grew at 12.3%. A World Bank report from last year found the government's capital stock has shrunk, meaning the productive base of the economy is getting smaller.

Read more: myRepublica (current spending breakdown), The Kathmandu Post (decade GDP gap)

Schools, Hospitals and Hot Plates Get the Bill

The Economic Bill 2083 adds a 3% "equity fee" to charges at private schools, colleges, and hospitals, with the revenue to be set aside for public education and health infrastructure. Households that are already paying out-of-pocket for both sectors are now going to pay more so the government can, in theory, improve the alternatives they opted out of. The bill also adds a 5% VAT on electricity consumption above 50 units a month - a change that former NEA chief Kulman Ghising says goes against global practice and Nepal's clean-energy goals. He says the grid now runs substations with more than 14,000 MVA of capacity and distribution transformers above 5,000 MVA, and that the VAT revenue will flow to the treasury rather than back into NEA infrastructure.

Read more: myRepublica (equity fee mechanics), myRepublica (Ghising dissent)

100% Gender-Responsive 0% Checked

For three straight fiscal years - 2022-23 through 2024-25 - Nepal's Ministry of Women classified its entire budget as "directly gender responsive." That wasn’t because anyone assessed the programs, but because an IT operator picks "direct" from a dropdown when entering budget headings (“try this one simple trick to… ”). There are apparently no indicators, no scoring, and no analysis. Between 44 and 59 percent of that perfectly-classified budget went unspent each year, heading back to the treasury.

Beijing Sets Quota While Kailash Sets Demand

China has capped Indian pilgrims to Mount Kailash by way of Nepal at 24,000 this season, a small increase over the 20,000 approved last year, but demand has already risen above 40,000 and tour operators have asked Beijing for another 15,000 slots. The Year of the Horse is to credit for the boom. Tibetan tradition holds that one circuit around Kailash in a Horse Year earns the spiritual merit of 12 or 13 in an ordinary one. Beijing sounds "positive" on expanding the quota, according to Basu Adhikari of Touch Kailash Travel. Foreign passport holders could result in another 5,000 pilgrims this season. The overflow is reshaping Humla, where the Hilsa route now supports seven hotels at the border and fifteen in Simkot, as well as a growing market for local apples, walnuts, and buckwheat.

Shenzhen Gets a Direct Line to Kathmandu

Himalaya Airlines launches a Kathmandu-Shenzhen route tomorrow, becoming the first carrier to fly direct between Tribhuvan International and the southern Chinese city that’s home to Huawei, DJI, and China's original Special Economic Zone. Twice-weekly service will run Tuesdays and Thursdays out of Kathmandu.

Read more: Spotlight Nepal (VP Shrestha), The Himalayan Times (buying channels)

Dial-Up Divestment

The FY2026-27 budget will result in a reduction of state ownership of Nepal Telecom from 91 percent to 66 percent. The freed-up shares will be offered to the public by mid-January. The proceeds are expected to be used to fund ambitions to become a "tech hub.” The proposed sale would be the largest state divestment in recent memory.

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