Private sector urges transformative budget under Finance Minister’s “Mission Mode” approach
Kathmandu: As the government prepares the budget for the upcoming fiscal year, the private sector has urged the government to introduce a transformative budget aimed at restructuring the economy.
The private sector has not only recommended a fundamental shift in the current economic model but has also expressed its commitment to support the process as a full partner.
On the political front, the government has brought new ideas and thinking, while a new leadership has been elected in the Federation of Nepalese Chambers of Commerce and Industry. Stakeholders have expressed confidence that this could bring a significant shift in the economic approach.
The priorities and principles of the Appropriation Bill have already been passed by both houses of the federal parliament. As per constitutional provisions, the Finance Minister will present the budget in a joint sitting of both houses of parliament on Jestha 15.
Submitting budget suggestions to Finance Minister Dr. Swarnim Wagle, the Federation stated that the upcoming budget is not merely an annual document but comes at a critical juncture in Nepal’s economic history, calling for a radical change in the existing economic model.
Finance Minister Dr. Wagle stated that citizens are no longer seeking speeches but results, and emphasized that legal reforms, institutional accountability, deadlines, digital tracking, direct monitoring, and result-based evaluation have been placed at the center of state operations. He said that for the first time, efforts are being made to move forward under a “mission mode” approach.
The private sector has suggested policy reforms to revive declining business confidence, stimulate market demand, re-attract stalled investment, and generate employment.
According to the newly elected president of the Federation, Anjan Shrestha, the recently unveiled national framework with “6 pillars and 60 initiatives” aligns with the government’s policies and programs.
The private sector has also concluded that an economy based on remittances and imports cannot ensure long-term prosperity. A total of Rs. 1.659 trillion in remittances was received in the first nine months of the current fiscal year, much of which is spent on consumption. Due to the import-based structure, the industrial sector has not expanded significantly, and despite increased liquidity in banks and financial institutions, investment has not grown.
Federation President Shrestha said investors have lost confidence due to frequent changes in tax policy. The private sector has demanded a single revenue code with clear interpretations and the formation of a powerful revenue board.
The Finance Minister has stated that the upcoming budget will lay the foundation for transformation in the economic model and assured private sector representatives that reform initiatives will be gradually implemented.
According to the Federation, the country’s industrial production capacity is currently limited to 40 percent. The construction sector is facing a severe downturn, and private sector contribution to gross fixed capital formation has fallen from 28 percent to 16 percent over the past four years.
The Federation estimates that the recent Middle East crisis could negatively impact Nepal’s foreign employment, remittance inflows, and foreign exchange reserves by around 1.8 percent.
It also noted that as Nepal’s demographic advantage gradually declines, the country has no option but to transition from a remittance-based economy to a manufacturing-based economy.
In the context of Nepal’s graduation from least developed country status to a developing country, there is a risk of losing preferential market access, while production costs related to transport and finance could further weaken Nepali products.
To address this, the Federation has emphasized the need for a special long-term integrated policy for export-oriented industries such as textiles, carpets, garments, pashmina, and felt.
The private sector has also demanded legal provisions allowing Nepali companies to invest a portion of their export earnings abroad for regional and international expansion.
It has called for immediate control of illegal imports through the open border and distortion caused by cheaper imports of finished goods under SAFTA.
Emphasis has also been placed on re-operating sick industries, making BOOT and PPP models effective in energy, transmission lines, pump storage, tunnels and industrial sectors, and encouraging private investment through a Viability Gap Fund.
Chairman Shrestha said the private sector expects the government to take concrete steps through the budget to transform Nepal into a production and export-oriented nation, prioritizing agriculture, tourism, herbs, tea, coffee, information technology and service exports.
The private sector has also suggested reforms in export promotion, agriculture, tourism, startups, and support for small and medium enterprises.
Finance Minister Dr. Wagle has expressed commitment to work jointly with the government and private sector, strengthen good governance in the budget process, promote private sector development, and support job creation through increased investment.
The Confederation of Nepalese Industries has also submitted consolidated suggestions to the Ministry of Industry and Investment covering tax policy, customs, tourism, agriculture, herbs, forest products, energy, IT, banking, insurance, cooperatives, capital markets, infrastructure, health, education, non-tax revenue, revenue leakage and money laundering.
Federation President Birendra Raj Pandey said they have proposed a budget that supports income generation and wealth creation, expressing confidence that improvements in economic expansion, employment generation, and investment growth will contribute to national prosperity.
The Federation has also recommended attracting private sector participation in large infrastructure projects, removing restrictions on mortgaging additional land required for approved industrial projects, ensuring policy stability for at least 10 years, and adopting an industrial development strategy focused on competitive products with emphasis on employment, production and import substitution.
Finance Minister Dr. Wagle reiterated that budget priorities are based on five guiding principles: good governance dividends, economic restructuring, integrated infrastructure, social investment, and multidimensional international relations. He stated that these priorities will support economic growth, employment, social justice, productivity, competitiveness, and improved living standards.