Nepal is at an economic juncture today where simple reforms and traditional budgets alone can no longer give the economy momentum. High remittance dependency, lack of productive investment, rapid youth migration, weak industrial base and ever-increasing trade deficit are clearly indicating that Nepal no longer needs small reforms, but structural economic restructuring.

We are now standing on the threshold of a historic opportunity to break out of the trap of sluggish economic growth and move towards a brighter economic future. In this context, the national budget to be made public on 15 Jestha should not be just a document of regular annual income and expenditure statements. It should play the role of a decisive roadmap to determine Nepal's economic direction for the coming decade.

If the government fails to convince the private sector through this budget, the economic slowdown will deepen further. But if bold economic reforms are initiated with this budget, there is still a possibility of transforming Nepal into an investment, production, employment and export-oriented economy.

The main economic decisions to be made by the budget are discussed here.

1. ‘Restoring trust’ in the tax system

The tax administration has become the area where Nepal’s private sector feels most insecure. The problem is not just in the tax rate, but the uncertainty of the tax system, legal interpretations made from a later date, and administrative pressure have weakened the investment climate. Therefore, the budget needs to take some decisions.

First, a tax stability policy should be implemented for at least five years, so that investors can clearly predict what the tax structure will be like in the coming years. Frequent tax changes discourage long-term investment.

Nepal’s trade-oriented economy was expanding, but the production-oriented economy was weakening. Now the budget should clearly adopt a ‘production first’ policy. Second, special tax exemptions and incentives should be provided for manufacturing industries, information technology, agro-processing, tourism, and export-oriented sectors. This can help increase the private sector’s trust in the government immediately.

Third, ‘tax terror’ should be ended. The need of the day is to make tax administration cooperative, not punitive. The tendency to treat businessmen like criminals has created fear and despair in the economy.

Fourth, human contact should be reduced by implementing a fully digital tax system. This will help control corruption, unnecessary interference and administrative arbitrariness.

Fifth, tax refunds and special incentives should be provided to export-oriented industries that earn foreign exchange. It is not possible to reduce the trade deficit without encouraging exports.

2. Converting remittances from consumption to investment

Limiting the huge remittances that enter Nepal every year to consumption alone has become one of the country's biggest economic weaknesses. Therefore, the budget should adopt a policy of converting remittances to investment.

First, 'expatriate bonds' should be issued so that Nepalis living abroad can feel a sense of belonging to the government and invest directly in national development.

Second, special arrangements should be made for non-resident Nepalis to invest in energy, infrastructure and productive sectors.

Third, tax concessions and other incentives should be provided to people who invest remittances in productive sectors.

3. Policy to keep industry and production at the center of the economy

Nepal's trade-oriented economy has been expanding, but the production-oriented economy has been weakening. Now the budget should clearly adopt the 'production first' policy. For this, some necessary steps should be taken.

First, special industrial zones should be developed with a stable tax policy for at least 10 years.

Second, the process of establishing industries should be made easy by building 'plug and play' industrial zones.

Third, cheap and reliable electricity should be provided to the industry.

Fourth, special concessions and protection should be provided to import-substituting industries.

4. Time to accept the private sector as an economic partner

In Nepal, the private sector still tends to be viewed only as a 'revenue-paying sector'. Now the government should accept the private sector as a strategic partner in economic development. Therefore, the budget should take some clear decisions.

First, private-public partnership projects should be accelerated.

Second, the active participation of the private sector in infrastructure construction and management should be ensured.

Third, government-owned idle assets should be put to commercial use.

5. Time to prioritize the digital economy

Nepal cannot afford to waste time chasing the pace of traditional development. The strategy of leapfrogging the digital economy has now become mandatory. Therefore, the budget should prioritize some issues.

First, a financial technology testing system should be implemented.

Second, a cross-border digital payment system should be expanded.

Third, an initial tax exemption should be provided to startup companies.

Fourth, tax concessions should be provided for data centers, artificial intelligence (AI) infrastructure, and digital services.

6. An economic strategy to provide opportunities to youth in Nepal

Nepal's biggest crisis is no longer just unemployment, but 'aspiration flight'. The situation where youth do not see their future within Nepal is becoming more dangerous. Therefore, the budget should bring the following programs.

First, a startup fund should be established. Second, an innovation grant program should be introduced. Third, a skill-linked employment program should be launched. Fourth, an entrepreneurship plan should be introduced for youth who have returned from foreign employment.

7. Making energy exports a national economic campaign

Hydropower should now not only be a subject of the Ministry of Energy, but should become the center of the national economic strategy.

Therefore, the budget should allow the private sector to build and operate transmission lines. A green hydrogen policy should be introduced. A clear strategy should be put forward to facilitate energy trade with India-Bangladesh.

Challenge: Implementation of announcements

There have been many policy announcements in Nepal, but the results have not been as expected. Therefore, now not only the announcements, but the implementation mechanism should also be clear in the budget. Therefore, a 'economic war room' should be formed under the leadership of the Prime Minister to ensure weekly progress reviews, monitoring of performance indicators, and direct participation of the private sector.