Submit your Article

Halfway through fiscal year 2025/26, the government has been compelled to confront an uncomfortable reality: ambitious plans announced at the beginning of the year are no longer financially or administratively feasible. 

The mid-term review of the fiscal budget reflects a series of downward revisions on spending, growth projections, and revenue targets. This highlights the persistent structural weaknesses of Nepal’s public finance management.

Budget size trimmed by Rs 275bn

The finance ministry has trimmed the budget for the current fiscal year by 14.04 percent. Then Finance Minister Bishnu Prasad Paudel had brought a budget of Rs 1,964.11bn in mid-May last year. However, with revenue shortfalls and sluggish expenditure performance, the government has now slashed the allocation by Rs 275.78bn, bringing the revised budget size down to Rs 1,688.32bn.

The reduction is a tacit admission that the government overestimated both its ability to mobilize resources and its capacity to spend effectively. Despite the cut, Minister for Finance Rameshore Prasad Khanal insisted that the budget has not technically been reduced. “The budget remains Rs 1,964bn. If any government body can spend that amount, the originally estimated resources will be made available,” he argued. 

He, however, pointed to the Rs 130bn deficit in the government treasury as the reason for tighter controls.

Chronic problem of slow capital spending

One of the most worrying indicators in the mid-term review is the dismal performance of capital expenditure. As of Feb 10, only 14.98 percent of the capital budget had been spent. This is an alarmingly low figure for a country desperate for infrastructure development.

The government had originally allocated Rs 407.88bn for development projects. This allocation has now been reduced by 40.35 percent to Rs 243.30bn by suspending funding for projects deemed unprepared or unproductive.

The mid-term review has identified lack of project preparedness, difficulties in land acquisition, complications related to forest clearance, and damage caused to infrastructure during the GenZ protests of Sept 8 and 9 as the reasons behind slow capital expenditure.

The cabinet had frozen most of the Rs 119.53bn allocated to projects lacking adequate groundwork, the Cabinet has frozen most of the funds. However, Rs 42.28bn has been released following justification from concerned ministries.

Growth target slashed to 3.5 percent

The government had set an ambitious six percent economic growth target for the current fiscal year.. The mid-term review has now revised that estimate sharply downward to 3.5 percent.

The downgrade reflects weak performance in agriculture and construction, sluggish real estate transactions, and disruptions caused by social unrest. According to the review report, a decline in paddy production, reduced cultivated area, and lower productivity have dragged down the agricultural sector, while construction activity has remained subdued.

Even the revised 3.5 percent target remains more optimistic than external projections. The World Bank has forecast Nepal’s growth at just 2.1 percent for this fiscal year, citing political uncertainty and economic disruptions. Economic growth in the previous fiscal year has been estimated at 4.6 percent.

Slow spending by development ministries

The very ministries entrusted with driving development have performed the worst over the first half of the current fiscal year. 

According to the mid-term review report, the Ministry of Urban Development has utilized only 6.31 percent of Rs 91.35bn allocated to it. The Ministry of Physical Infrastructure and Transport fared comparatively better, spending 18.12 percent of the total allocation of Rs 153bn.  The Ministry of Energy, Water Resources and Irrigation also managed to spend only 16.56 percent of the allocated Rs 42.77bn.

In contrast, non-development ministries have fared better. The Ministry of Foreign Affairs has already spent 55.8 percent of its budget, while the Ministry of Finance itself has spent 35.54 percent.

Revenue collection falls short

Revenue mobilization has also been weaker than expected. By mid-January, only 81.75 percent of the targeted revenue had been collected. The government could mobilize only Rs 581.4bn out of the targeted Rs 711.20bn in the six-month period. Although revenue is 2.47 percent higher than last year, it remains far below the required level.

Import growth of 17.36 percent has not translated into proportional customs revenue, which rose by only 8.48 percent. The finance ministry has attributed this to increased imports of low-tax goods, ineffective border control, and weak market monitoring.

Lower interest rates have reduced income tax collections, while sluggish real estate and stock market activity has hit capital gains tax. The tourism sector has also underperformed, partly due to the September unrest. Citing these reasons, the government has revised down revenue target from Rs 1,480bn to Rs 1,298bn.

Adm. Samuel J. Paparo, commander of the United States Indo-Pacific Command (INDOPACOM), has said his visit highlighted Nepal’s leadership in promoting regional stability, disaster preparedness, and peacekeeping. He visited Nepal ahead of the March 5 elections to the House of Representatives (HoR), which are taking place against the backdrop of the September 8–9 Gen Z protest.

The visit highlighted Nepal’s leadership in promoting regional stability, disaster preparedness, and peacekeeping. U.S.-Nepal cooperation in these areas benefits Nepali and American citizens throughout the region and supports global peacekeeping efforts, says a press statement issued by INDOPACOM after the two-day visit.

During his stay, Paparo met Foreign Minister Bala Nanda Sharma and Gen. Ashok Raj Sigdel, Chief of Army Staff of the Nepali Army, to discuss strengthening collaboration in disaster response and Nepal’s significant contributions to United Nations peacekeeping missions.

At the Birendra Peace Operations Training Centre in Panchkhal, Paparo interacted with Nepali peacekeeping professionals and observed pre-deployment training activities. The center plays a vital role in preparing Nepali troops for UN peacekeeping missions and supports multinational peace operations, reinforcing Nepal’s standing as one of the world’s leading troop-contributing countries to UN missions.

An alumni event hosted by the Daniel K. Inouye Asia-Pacific Center for Security Studies (APCSS) and its director, Suzanne P. Vares-Lum, brought together Nepali graduates of APCSS programs. The gathering provided a platform for security professionals to exchange ideas and explore collaborative approaches to regional security challenges.

INDOPACOM and Nepal have maintained close cooperation in strengthening disaster response capabilities through joint exercises, technical assistance, and the provision of non-combat equipment such as helicopters, vehicles, and communication systems. U.S. training and logistical support have also enhanced Nepal’s capacity to conduct humanitarian and peacekeeping operations, the statement said.

Officials said the partnership aligns with Nepal’s goal of enhancing self-reliance while contributing to regional resilience and preparedness. The U.S. Indo-Pacific Command reiterated its commitment to promoting stability across the region through security cooperation, peaceful development, and coordinated responses to emerging challenges, according to the statement.

Paparo’s visit highlighted Nepal’s strategic importance in South Asia and reaffirmed its leadership role in fostering regional stability and advancing global peacekeeping efforts.

During then Foreign Minister Pradeep Kumar Gyawali’s visit to the United States on December 18, 2018, then U.S. Secretary of State Michael R. Pompeo highlighted Nepal’s central role in a free, open, and prosperous Indo-Pacific and in global affairs.

 The 2019 U.S. Department of Defense Indo-Pacific Strategy Report officially described Nepal as a valued partner. The report listed Nepal as a member of the State Partnership Program (SPP), which was later rejected by the Nepal government.

This week, House Foreign Affairs Subcommittee on South and Central Asia Chairman Bill Huizenga has said that recent elections in Bangladesh and Nepal present new opportunities for U.S. engagement in South Asia.

In his opening remarks at a subcommittee hearing titled “South Asia: U.S. Foreign Policy in the Region,” Huizenga described South and Central Asia as a dynamic region where young and growing populations are increasingly drawn to Western cultures and values rather than to what he called China’s “authoritarian alternative.”

Bordering India, both Nepal and Bangladesh are undergoing significant political transformations. Bangladesh held general elections on February 12, following the July 2024 revolution that led to the ouster of an authoritarian government in September 2025. Meanwhile, Nepal is set to hold democratic elections on March 5 after youth-led protests overthrew the previous government.

Newly appointed Chinese Ambassador to Nepal, Zhang Maoming, has pledged to implement the important consensus reached between the two countries during Xi Jinping’s 2019 visit to Nepal.

In remarks made upon his arrival to assume office, Ambassador Zhang said, “I look forward to working with friends from all sectors of Nepal to carry forward our traditional friendship and advance all-round exchanges and cooperation across all fields.”

He added that the Embassy of the People's Republic of China in Nepal will continue to practice people-centered diplomacy, serve as a trusted partner to Chinese nationals in Nepal, and act as a steadfast guardian of their legitimate rights and interests overseas.

“Let us work hand in hand to advance the Strategic Partnership of Cooperation Featuring Everlasting Friendship for Development and Prosperity between China and Nepal, and jointly build a China-Nepal community with a shared future,” he further said.

Ambassador Zhang noted that 2026 marks the opening year of China’s 15th Five-Year Plan period. China will accelerate the advancement of Chinese modernization and proactively expand high-standard opening-up, creating new development opportunities for countries around the world, including Nepal.

“Nepal is also at a critical stage of transformation and transition,” he said. “At a time when changes unseen in a century are accelerating and turbulence and transformation are interwoven in the international landscape, China stands ready to work with Nepal to implement the four Global Initiatives, strengthen solidarity and cooperation among the Global South, and jointly promote an equal and orderly multipolar world and universally beneficial and inclusive economic globalization, so as to contribute to building a community with a shared future for mankind.”

In 2019, President Xi Jinping paid a historic and successful state visit to Nepal, elevating bilateral relations to a Strategic Partnership of Cooperation Featuring Everlasting Friendship for Development and Prosperity, he said.  Under the strategic guidance of our two countries’ leaders, political mutual trust has continued to deepen, high-quality Belt and Road cooperation has delivered fruitful results, and people-to-people exchanges have grown ever closer, bringing tangible benefits to our two peoples, he added.

Over the past five years, the Commission for the Investigation of Abuse of Authority (CIAA), under the leadership of Prem Kumar Rai, has sought to make the commission more proactive in controlling corruption and promoting good governance. Under Rai’s leadership, the CIAA has taken strong action against irregularities and corruption in public land, information technology, healthcare, and aviation sectors. In a special interview with Balkrishna Basnet and Surendra Kafle of Annapurna Post, the sister publication of The Annapurna Express, Rai, who rarely speaks to the media, shared his views.

You have completed five years leading the CIAA. Which areas did you focus on during this period?

There is widespread embezzlement and misuse of government and public land across the country. In many places, such land has been registered in individuals’ names. From the outset, I said my first priority would be to bring such land back under government ownership.

Second, at the policy level, I focused on reforming the Prevention of Corruption Act and the CIAA Act. These laws had become outdated and required amendments. At that time, sting operations had also been halted. From the beginning of my tenure, I made it clear that policy reform would be a key priority.

Third, public perception of the CIAA had become increasingly negative. I committed to restoring the institution’s credibility. These were the three main priorities I pledged to pursue.

When I first studied the condition of the CIAA, I found that digitalization had not been implemented. Immediately after assuming office, I prioritized digitalizing the entire system—from complaint registration to detailed investigation processes. This has made it easier to assess governance status and identify urgent actions.

What kinds of land-related cases emerged? What trends did you observe?

We are extremely weak in maintaining land records. Proper digitization has not been completed. It was found that even responsible agencies, such as District Administration Offices, local governments, and the Ministry of Land, had failed to adequately protect government and public land.

After the Land Act of 1964, a decision was made to bring land exceeding the legal ceiling—held by Rana elites, Shah rulers, and wealthy landlords—under government ownership. The CIAA has repeatedly written to the Ministry of Land Management to implement this decision. However, even after decades, excess land has not been reclaimed. This is a major institutional weakness.

Even after 50 years, such land continues to be misused. This reflects a failure on the part of the Government of Nepal. In Kathmandu Valley alone, one individual still holds more than 4,000 ropanis of land. There are many similar cases.

It is said that the information technology sector is even more chaotic. Is that true?

Yes, the IT sector was deeply problematic. Serious irregularities were found in the purchase, installation, and operation of software and related systems. After we assumed office, the CIAA began investigating this sector in depth for the first time. Previously, there was limited understanding of IT within the institution. Complaints were filed, but even investigators struggled to fully grasp technical aspects.

Because IT is complex and constantly evolving, officials often accepted suppliers’ claims without sufficient scrutiny. Procurement in the IT sector proved highly risky. Determining the actual value of software was difficult. Prices could be arbitrarily inflated, specifications manipulated, and verifying compliance required additional IT expertise.

A small group monopolized the sector. Since only a limited number of experts understood the systems, they exploited this knowledge gap. In projects such as the Teramocs system, Security Press, Government Integrated Data Center (GIDC), and telecom billing systems, prices were massively inflated. For example, equipment worth Rs 10m was sometimes priced at Rs 250m to accommodate commissions.

Besides land and IT, which other sectors showed irregularities?

Healthcare was another major sector. Procurement of medical equipment had long gone unchecked. Investigations revealed monopolies by a few agents. Once we filed some cases, complaints began to increase significantly.

In one instance, we spent three months in Madhesh Province, visiting municipalities and rural municipalities. We discovered collusion in drafting technical specifications tailored to specific companies. In some cases, specifications were written for one product, but cheaper alternatives were supplied instead. This was a common method of corruption. Like IT procurement, medical equipment procurement also involved serious irregularities.

It is also said that excessive equipment is purchased but left unused. What did you find?

Yes, this is another serious distortion. Both IT and medical equipment were often purchased beyond actual needs and left unused. By the time they were utilized, they had already become outdated.

There are many examples of equipment being purchased merely to exhaust budgets. In some cases, staff lacked the skills to operate the machines. In Madhes Province and other areas, equipment supplied by provincial authorities and the Department of Health Services was simply stored without use.

In places lacking manpower and infrastructure, unnecessary equipment was procured, creating opportunities for corruption. For example, while villages required basic blood-testing facilities, equipment capable of conducting 20 different tests was supplied unnecessarily. During the Covid-19 period, large quantities of equipment were purchased and later left unused, turning health facilities into storage warehouses.

How is the CIAA dealing with the alleged irregularities in the aviation sector?

We have only recently begun investigating airport construction. There appears to be misuse of budgets in this sector, with greater emphasis on spending allocated funds than on assessing actual needs.

Airports are being built larger than necessary, with excessive and unjustified expenses. For instance, Nepalgunj Airport, which was constructed at a cost of Rs 4bn, reportedly includes a shopping center, which may not be viable. Similar concerns have been observed at Bharatpur and Biratnagar airports. We are studying these issues and preparing further cases. We have already examined the case pertaining to Pokhara International Airport. The Public Accounts Committee also reviewed it and shared its report with us, which supported our investigation. A case has already been filed.

As for Bhairahawa International Airport, which was built with a loan from the Asian Development Bank, it is struggling even to repay interest. Despite this, additional infrastructure such as taxiways is still being constructed, and there are also discussions about building Terminal-2. Such activities are cause for concern.

Airports should only be constructed after thorough feasibility studies, as well as assessment of flight demand, potential returns, public benefit, and air route agreements. The same principle applies to proposed projects such as Nijgadh International Airport.

What kinds of threats do you face as chief commissioner?

In this position, I have simply fulfilled my constitutional responsibility. The commissioners and I act strictly within the authority granted by the Constitution. We do not act with bias or favoritism. Decisions are based on investigative findings.
Naturally, once cases are filed, not everyone will be pleased. In such roles, there are often more adversaries than allies. While direct threats are rare, indirect pressures do occur. Some individuals distance themselves after cases are filed.

How easy has it been to maintain good governance and control corruption?

Many people speak about corruption, but when asked to submit formal written complaints, they hesitate. Maintaining good governance and controlling corruption is challenging and requires collective effort.

There is a misconception that corruption control is solely the CIAA’s responsibility. Many complaints fall outside our jurisdiction, such as assault, fraud, marital disputes, and inheritance conflicts. Each year, around 37,000 complaints are registered, and most do not concern corruption. The CIAA handles only corruption cases. Recently, we have also been granted authority over money laundering cases, and three such cases have been filed.

The CIAA is not the only body responsible for controlling corruption. It is essentially the final resort and primarily a prosecutorial body. Nepal has federal, provincial, and local governments, and their responsibility is to prevent corruption at their respective levels. If they properly enforce laws and maintain accountability, the CIAA’s role would be minimal. The belief that the CIAA alone can control corruption is misguided.

There are widespread claims of corruption at provincial and local levels, aren’t there?

Yes, approximately 50 percent of corruption occurs at the local level. Development projects are sometimes effectively “sold” at provincial and local levels. There is widespread misuse of consumer committees in local governments. Unnecessary staff recruitment and excessive procurement have increased recurrent expenditure. There is a prevailing mindset that “anything can be done.”

Despite the CIAA’s efforts, this tendency has not fundamentally changed. The core issue is that our society appears to have normalized corruption. Our presence creates some deterrence, but without the CIAA’s interventions, Nepal might already have faced international blacklisting. Unless society becomes more aware and proactive, controlling corruption will remain difficult. No one should assume they can escape accountability.

Why is there dissatisfaction toward the CIAA?

Intermediaries or middlemen often play a role in attacks against the CIAA. When such actors influence state operations, they also attempt to influence the commission. Past controversies have also affected the institution’s image.

The CIAA must continue to demonstrate impartiality and independence. There is a tendency among some individuals to seek protection for themselves while demanding strict action against others. Such attitudes undermine good governance and make corruption control more difficult.