Ever wondered if Nepal was a company and we, the citizens, were its shareholders, would we be more concerned about how the Government of Nepal generated money and spent it? Well, if our country was a company, then the parliament would then be the board of directors and the Government of Nepal, the management team. All the bureaucracy and government officials would be its employees. 

In such a case, wouldn’t we be concerned about if our company made a profit or loss and if it was paying more to its management executives? Maybe, we would also be interested in its annual plans of how much revenue it plans to collect and how much dividend it would pay. 

Well, if you were expecting a dividend, then you are in for utter disappointment because the budget of the Nepal Government forecasts a revenue shortfall even to meet its annual expenditure. That’s why it resorts to various international grants, loans etc. to keep everything running. And in a corporate world, Nepal Inc. would already be insolvent. Now, maybe you would want to question why the CEO (i.e. PM) is on a foreign trip when the finances are in such a mess.

But, since it’s not a profit oriented company but a welfare oriented state, it continues to run despite the losses every year. And we don’t seem to bother much about how and where the Government is spending money. When it comes to financial mess, this year is no different. 

The first quarter of Nepal’s fiscal year has come and gone, and with it, some concerning figures about the government’s revenue collection. Out of the ambitious Rs 1.419 trillion annual target, only 17.49% has been collected so far. While that might seem like a step forward compared to last year, it still raises a big question—can the government turn this slow start into a winning streak, or is it set for yet another year of budget deficits and loan dependence?

But what does this slow revenue collection mean for the country’s overall financial health? And how does it tie in with the government’s spending habits, which seem to always exceed its earnings? Let’s break down the numbers, dig into the trends, and explore the broader economic picture behind the shortfall.

Revenue Collection: Falling Short, but Showing Some Improvement

Between mid-July and mid-October, the Government of Nepal managed to collect Rs 248.26 billion. While this number might seem substantial, it falls far short of the ambitious Rs 1.419 trillion annual target, amounting to only 17.49% of the goal. It’s as if Nepal Inc. is struggling to bring in enough revenue to cover its daily operations. Though this is a slight improvement compared to last year’s first-quarter figure of Rs 213.39 billion (15.93% of the target), it’s clear the pace of revenue collection isn’t where it needs to be.

What's driving this marginal improvement? The government has intensified tax collection efforts, and there's a slight uptick in economic activity. However, the revenue collected thus far indicates a slow start, leaving the government in a tight spot. Without a substantial ramp-up in revenue collection, the fiscal year could be headed toward a significant shortfall, akin to a company that has overestimated its income and is headed for a budget crisis.

The Private Sector: Playing It Safe

In Nepal Inc., the private sector can be thought of as one of the key revenue-generating departments, and right now, it seems to be operating cautiously. Lending by banks and financial institutions has only increased by 1.4% in the first two months, which suggests that businesses are holding off on major investments. This hesitancy reflects a broader lack of confidence in the current economic environment and in the government's policy direction.

If businesses aren’t investing, the country’s growth stalls, and that directly impacts the government’s ability to collect taxes, much like a company's sales department struggling to meet targets due to low market demand. Without significant private sector activity, there’s less taxable income flowing into the government’s coffers, which will widen the revenue gap even further.

Public Spending: Prioritizing Debt Over Development

While revenue collection has been sluggish, government spending tells a different story. Public expenditure in the first quarter stood at Rs 329.20 billion, or 17.7% of the annual target. Of this, a significant Rs 229.85 billion was spent on recurrent expenses like salaries and operational costs, while Rs 69.97 billion went toward debt servicing. Alarmingly, only Rs 29.37 billion (8.34%) was spent on development projects—critical areas that could help drive future growth.

In corporate terms, this would be like spending most of the company’s budget on keeping the lights on and paying back loans, with little left to invest in new projects that could generate future revenue. By prioritizing operational costs and debt payments over development, the government risks stunting long-term economic growth, reducing its ability to generate future income.

The Balancing Act: Revenue vs. Expenditure

The Government of Nepal, much like a company in financial trouble, is facing a precarious balancing act between its income and expenditure. Right now, it’s spending more than it’s bringing in. If this trend continues, it will be forced to either increase borrowing—piling on more debt—or cut spending. Neither option is ideal.

More borrowing would mean higher debt-servicing costs in the future, while spending cuts—especially in development—could hamper the country’s long-term growth. This is a critical moment for the government, and how it handles the coming months could determine whether it can stabilize its finances or sink deeper into debt dependence.

Final Thoughts

In summary, the first quarter of revenue collection shows a slight improvement compared to last year, but Nepal’s financial situation remains precarious. Just like a struggling company, Nepal Government is grappling with low revenue collection, high operational costs, and mounting debt. The private sector is cautious, reflecting a lack of confidence, and public spending is tilted heavily toward debt repayment and operational expenses rather than development.

To turn the tide, the government needs to foster a more investment-friendly environment, encouraging businesses to expand and invest. This, coupled with better tax collection and a renewed focus on development spending, could create the growth needed to meet revenue targets. 

The next few months will determine whether the government can achieve a balance between revenue and expenditure or face another year of deficits and increasing debt reliance.