Kathmandu: Nepal government has reported that revenue collection in the current fiscal year 2025/26 has lagged behind expectations through the end of December.
The Ministry of Finance indicated that out of an annual revenue target of approximately US$ 10.3 billion, the goal for the first five months was around US$ 3.6 billion. However, actual collections reached only about US$ 2.84 billion, achieving just 78.74 percent of the period’s target.
In December alone, the government aimed to collect roughly US$ 660 million but managed only US$ 556 million, representing 84.31 percent of the monthly goal. On the final day of the month, collections amounted to approximately US$ 24 million.
Compared to the previous fiscal year 2024/25, when the annual target was lower at around US$ 9.85 billion and five-month collections stood at about US$ 2.81 billion (with US$ 532 million in December), this year’s performance shows only marginal improvement despite a higher overall ambition.
The shortfall stems primarily from slower-than-expected economic expansion, which has put pressure on tax revenues. Recent Gen Z protests have disrupted industries and supply chains, further impacting collections even after the movement subsided due to lingering delays in imports and logistics.
Capital spending by the government has also failed to ramp up as planned. Higher infrastructure investments could have stimulated broader economic activity and boosted revenues, but low execution rates have limited this potential support.
On a positive note, import-based revenues have risen, with customs duties, excise taxes, and VAT increasing by 17-18 percent alongside higher import volumes. However, declines in non-tax revenues and income taxes have offset these gains, making it challenging to meet overall targets.
The banking and financial sector, a major contributor to income tax, has seen deteriorating asset quality, leading to lower profits and reduced corporate tax payments. Falling interest rates have also decreased collections from interest income taxes.
Specifically, the target for income tax through December was US$ 595 million, but only US$ 423 million was collected. Interest tax collections fell even shorter, with just US$ 83 million gathered against a US$ 243 million goal.
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