NEPAL BUDGET 2077/78 SUMMARY
1. Budget Highlights
Fiscal Year
Budget Allocation
Current Expenditure
Capital Expenditure
Financial Management
Total
2077/78
Amt (in
Billions)
948.94
352.91
172.79
1,474.64
Fiscal Year
2077/78
Amt (in
Billions)
889.62
60.52
299.50
225.00
1,474.64
Sources of Revenue
Tax Revenue
Foreign Grant
Foreign Debt
Internal Debt
Total
%
64.35%
23.93%
11.72%
100.00%
%
60.33%
4.10%
20.31%
15.26%
100.00%
Budget Allocation (Amt in Billions) for
FY 2020/21
172.79,
12%
2076/77
Amt (in
Billions)
%
Change %
957.1
62.43%
-0.85%
408.01
26.62%
-13.50%
167.86
10.95%
2.94%
1,532.97 100.00%
-3.81%
2076/77
Amt (in
Billions)
%
981.14
64.00%
58.00
3.78%
298.83
19.49%
195.00
12.72%
1,532.97 100.00%
Sources of Fund (Amt in Billions)
for FY 2020/21
15%
Current
Expenditure
352.91,
24%
Capital
Expenditure
948.94,
64%
Financial
Management
Change %
-9.33%
4.34%
0.22%
15.38%
-3.81%
Tax Revenue
Foreign Grant
20%
61%
4%
Foreign Debt
Internal Debt
2. Nepal achieved consistently high economic growth rate in the past few years. But due to Covid19 crisis, the estimated economic growth rate (revised) of GDP is 2.3% for the current fiscal year
(FY 2076/77). Tourism, transportation, construction and manufacturing sectors are expected to
shrink in the current fiscal year.
3. Average 9-months inflation for the current fiscal year is estimated at 6.5%.
4. There has been remarkable increase in access to banking and insurance services throughout the
nation. In the current fiscal year, more than 1000 addition of new branches across the country
and increase of insurance coverage facility from 56 lakh to 70 lakhs people.
Nepal Budget 2077/78 Review: Impact on Capital Markets
5. Exports have increased by 12.9% whereas imports have decreased by 7.5% during 9 months of
the current fiscal year. Due to this, there is significant improvement in balance of payment.
Surplus has reached NPR 36.61 Arba & foreign exchange reserve has increased by NPR 1.17
kharba, reaching total of NPR 11.56 Kharba.
6. For FY 2076/77, the capital expenditure and revenue mobilization have been both affected by
COVID-19 pandemic. Only about 70% of total government expenditure planned for this fiscal
year is estimated to be spent, i.e. NPR 10.73 kharba. 73.3% of budgeted current expenditure,
58.6% of budgeted capital expenditure and 78.8% of budgeted financial management
expenditure estimated to be spent.
7. Government of Nepal (GoN) has targeted to provide health insurance access to the whole
population within the next three years. Within the next fiscal year, at least 40% of population of
each local body will have access to health insurance. GoN has allocated NPR 7.50 arba for health
insurance expenditure.
8. Small & medium industries, cottage industries, and agriculture, manufacturing, hotel, tourism
industries affected by corona will be provided credit at 5 % interest rate. Provision of refinancing
loan of NPR 1 kharba to be provided under this.
9. Plan to create 40 thousand jobs through SKBBL program “Sana Kisan Karjha Scheme”. Sana
Kisan Bikas Bank will be lent NPR 3.60 arba in order to provide assistance to several cooperatives.
10. Tax rebate, interest subsidy to be provided to airlines, travels agency, trekking agency, hotels
and restaurants.
11. Nepse transaction will be made completely electrical technology based.
12. Capital market scope to be enhanced and debt instruments to be traded through secondary
market. Stock dealer to start functioning by fiscal year 2077/78. Organization improvement will
be done at SEBON, Nepse and CDSC.
13. Hedging of foreign currency will be encouraged and commodity market will be brought into
functioning.
14. Hydropower projects with total capacity of 1300 MW expected to start production in fiscal year
2077/78 and added to national grid. Upper Sanjen, Rasuwagadhi, Upper Tamakoshi and Middle
Bhotekoshi projects expected to be completed.
15. Construction of international transmission line of 400 KV capacity : Jhapa to Mahendranagar,
Lapsiphedi – Ratamate – Hetauda, Lapsiphedi – Ratamate – Damauli – Butwal and Dhaklebar Muzaffarpur transmission lines to proceed forward.
16. Hydropowers holding licenses without starting construction for long periods will be discouraged
by cancelling the licenses.
17. PPA of the hydropower projects will be conducted in competitive manner.
18. Digital Nepal Framework will be implemented. Policies regarding Information, Telecommunications and existing broadband policy will be modified and the fiber to the home
program and reliable broadband internet services will be made available in all locations in Nepal
within 2 years. The 4G service will be expanded nationwide within next year.
19. Only front workers (Health Professionals and Security Personnel) involved in Corona pandemic
will be provided allowances. Travel allowance, fuel, furniture, new vehicles purchase as well as
Nepal Budget 2077/78 Review: Impact on Capital Markets
repair expenses will face cut in budget. Motivation allowances, overtime allowances, meeting
allowances, lunch allowances and other types of allowances for government employees except
the above mentioned front workers will be dismissed from 1st Shrawan 2077.
20. Corona virus insurance coverage of Rs 1 lakh to be provided for free of cost to temporary and
permanent government staffs.
21. For FY 2076/77, micro, cottage and small industries and business person with annual transaction
upto NPR 20 lakhs will get 75% exemption in tax, transaction between NPR 20 lakhs to NPR 50
lakhs will get 50% exemption in tax, and transaction between NPR 50 lakhs to NPR 1 crore will
get 25% exemption in tax.
22. 20% exemption in income tax for aviation, transport service, hotel, travel and trekking agencies
affected by the pandemic for fiscal year 2076/77.
Nepal Budget 2077/78 Review: Impact on Capital Markets
NEPAL BUDGET 2077/78 IMPACT ASSESSMENT ON CAPITAL MARKETS
IMPACT ON OVERALL STOCK/CAPITAL MARKET
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The overall contraction in economic activities will slow down the activities of the individual
companies from both the supply and demand sides. Revenues and profitability to be hit.
Introduction of new instruments, start of commodity market and stock dealer service, and
secondary market listing of debt instruments will help in expanding the scope of the capital
markets.
Complete digitization of NEPSE as well as structural improvement in SEBON, CDS and NEPSE will
enhance the operational efficiency in the stock market.
With the target of completing credit rating task of Nepal within six months, it will encourage the
flow of foreign direct investments in the Nepalese market, as foreign investors seek country
rating to quantify risks associated with investments in the country.
Cut of allowances of Government Employees will reduce their disposable income resulting in
decrease in investable fund.
IMPACT ON DIFFERENT SECTORS
Banking Sector
 Access of banking service will be expanded, thereby opening growth opportunities.
 Restructuring and further expansion of convenient loan ( 5% lending rate) provided by banking
sector to corona hit industries may help in the credit growth
 Trading of debt instruments issued by the banks in the secondary market will make them
attractive to the investors, enabling more BFIs to go for debentures. This will give banks the
option to manage liquidity efficiently.
 The digitization of NEPSE can provide big opportunity for banking sector in terms of expanding
their services in stock trading business.
Insurance
 Access of insurance service, especially health insurance, will be expanded, thereby opening
growth opportunities.
 The fund allocation for insurance coverage for 40% of population of each local body will impact
health insurance business. This could have a huge positive impact on growth in the insurance
sector. However, it depends upon the modality which government uses to implement this
program, i.e. self-operated by government or through existing insurance companies.
 The business of insurance company is expected to grow as the insurance facility will be made
affordable and accessible to the general public.
 Non-life insurance will be benefited from the promotion of agro insurance and micro insurance.
 The government policies support the expansion of market reach of the insurance sector, hence,
the increment in business and subsequently, profitability of the insurance companies can be
expected.
Nepal Budget 2077/78 Review: Impact on Capital Markets
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Extension in the insurance of industries and public transportation affected by lockdown might
increase the claim ratio and expenses of the insurance companies.
Free Corona Virus Insurance of Rs. 100,000 to all the permanent and temporary government
employees of Nepal Government might give opportunity in business increment for the
government owned non-life insurance company, i.e. Rastriya Beema Company Ltd, if
government decides to insure through it.
Hydroelectricity
 Construction of 400 KV capacity inter-nation electricity transmission line will reduce the
evacuation risk of electricity generated for hydropower projects. This will also encourages new
hydro projects in the country.
 By discouraging and cancelling the licenses of hydropower companies holding license for long
period without construction will force timely construction of the projects.
 Competitive method for the PPA might negatively impact on the profitability of new projects.
However, this might also enforce the companies to improve operational efficiency.
Hotels
 Tax rebate, interest subsidy to be provided to hotels will help to reduce the incurred loss by
decreasing their expenses.
 20% exemption in tax for the hotel sectors will give some financial relief. However, for the
hotels listed in Nepse, it is more likely that they will register loss for this year due to lockdown
brought about by pandemic.
Manufacturing and Processing
 The business of manufacturing companies is expected to contract.
 Providing 50% rebate in electricity used by industries in no-peak hours will help in reducing the
electricity expense of the manufacturing companies.
Microfinance
 Loan based fund scheme will help Sana Kisan Laghubitta Bittiya Sanstha (SKBBL) to increase
credit growth with low cost of fund.
 Promotion of agro insurance and micro insurance is expected to be done through microfinance
companies, thereby increasing their scope and business volume.
 The growth and expansion in the agro insurance and micro insurance will also help to safeguard
the lending of microfinance companies.
 Tax exemptions for micro, cottage and small industries will help the customers of microfinance,
decreasing probability of defaults and increasing timely repayments.
Others
 Implementation of Digital Nepal Framework might provide opportunity to Nepal Telecom (NTC)
for the expansion of its internet services all over the Nepal.
Nepal Budget 2077/78 Review: Impact on Capital Markets