KATHMANDU: Nepal’s economy is increasingly reflecting a widening gap between income and expenditure-both at the household level and in public finance-raising concerns over long-term financial stability and growth sustainability.

From basic needs such as food, shelter and clothing to essential services like education and health, adequate and stable income remains the foundation of economic security. However, a growing number of households are struggling with uncertain or insufficient earnings due to weak job creation, limited entrepreneurial activity and a lack of stable employment opportunities.

As a result, many families are finding it increasingly difficult to meet daily living costs, while rising prices continue to push household expenses higher. The combination of stagnant income growth and persistent inflation has deepened financial pressure, particularly for low- and irregular-income households, pushing many into a cycle of debt and economic vulnerability.

Rising dependence on remittance-driven economy

Nepal’s labour market continues to face structural challenges, with limited expansion in domestic industries and weak private-sector growth constraining job creation. In this context, foreign employment has become the primary option for a large share of the workforce.

According to the National Statistics Office’s Nepal Living Standards Survey (Fourth), 2022/23, about 76.8% of households receive remittance income. On average, each household receives around Rs145,000 annually from abroad, making remittance a key pillar of household consumption and national economic activity.

Economists warn that without remittance inflows, the gap between income and expenditure would widen further, significantly increasing financial stress on households and weakening overall economic resilience.

Government and households share a common fiscal pattern

Nepal’s public finance structure mirrors the financial condition of many households: both operate with expenditure exceeding income.

The government relies on a mix of revenue, domestic and external borrowing, and grants to finance its budget deficit. Similarly, households depend on loans, asset sales and informal borrowing to manage expenses.

For the current fiscal year 2083/84, the government has set a total budget of Rs2.134 trillion. Of this, Rs1.405 trillion (66.2%) is expected from revenue, Rs61.74 billion (2.9%) from foreign grants, Rs247.28 billion (11.6%) from external loans, and Rs410 billion (19.3%) from domestic borrowing.

Rising fiscal deficits have pushed Nepal’s total public debt to Rs2.974 trillion by fiscal year 2082/83, equivalent to 45.1% of GDP. In the last fiscal year alone, debt increased by Rs385 billion, placing an average burden of around Rs102,000 on each citizen.

Household income remains below expenditure

A similar imbalance is visible at the household level. According to the National Transfer Accounts report, the average annual income per person stands at Rs87,814, while average expenditure reaches Rs140,179—creating a deficit of Rs52,365 per person.

To bridge this gap, households increasingly rely on borrowing, asset liquidation and informal credit. The Nepal Living Standards Survey also highlights that many families are forced into debt just to meet basic consumption needs, indicating growing financial fragility.

Low income, unemployment and inflation pressure

Weak labour market outcomes remain a key driver of low income levels. Limited skills, low productivity, high unemployment and low labour force participation continue to restrict earning opportunities.

The NSO survey shows an unemployment rate of 11.4%, youth unemployment at 12.7%, and labour force participation at just 38.5%. With a large share of the working-age population outside stable employment, household income remains constrained while dependency burdens increase.

At the same time, inflation continues to erode purchasing power. Nepal Rastra Bank data shows average consumer inflation at 4.06% in fiscal year 2081/82. When wage growth fails to match inflation, real income declines, forcing households to rely on debt or asset sales to maintain consumption.

Income–expenditure gap deepens inequality

The widening gap between income and expenditure is also intensifying inequality. While higher-income groups are less affected by inflation, low- and irregular-income households face rising financial stress.

This imbalance is contributing to declining living standards, reduced savings capacity, and lower investment in productive sectors. It is also increasing household debt burdens and psychological stress, while limiting access to quality education, healthcare and other essential services.

Economists warn that if the trend continues, it could undermine long-term economic growth and social stability.

Revenue pressure in Wagle-led budget adds concern

At the macro level, Nepal’s fiscal challenges are also becoming more visible. In the first month of the fiscal year under Finance Minister Dr Swarnim Wagle’s budget, revenue collection has shown only modest growth, raising concerns over the feasibility of ambitious targets.

According to the Financial Comptroller General Office, the government collected Rs92.22 billion in Shrawan, equivalent to 5.84% of the annual target. This is slightly higher than Rs84.78 billion collected in the same month last year, but the growth rate remains modest compared to the rising revenue target.

The government aims to collect Rs1.58 trillion in revenue this fiscal year out of a total budget of Rs2.124 trillion. This represents a 27.31% increase over last year’s actual revenue collection of Rs1.241 trillion, making the target significantly more ambitious.

However, early monthly performance—showing only around 9% growth—suggests that achieving the full-year target may be challenging if current trends persist.

Structural leakages and weak capital spending

Revenue mobilisation continues to face structural challenges, including under-invoicing, informal trade, weak tax compliance and administrative inefficiencies.

Officials identify under-invoicing of imports and widespread informal transactions as major sources of revenue leakage, affecting customs duties, VAT, income tax and excise collection. Weak enforcement at customs points and allegations of collusion between businesses and officials further complicate the situation.

In addition, low capital expenditure is limiting economic activity. The government spent only Rs1.32 billion on capital projects in the first month of the fiscal year, restricting market demand and private-sector growth, which in turn affects tax revenue.

A shared challenge of imbalance

The parallel between household finances and national fiscal management highlights a deeper structural issue in Nepal’s economy: a persistent imbalance between income and expenditure.

Economists argue that addressing this challenge requires coordinated reforms—expanding productive employment, strengthening industrial and agricultural investment, improving tax administration, controlling inflation, and enhancing financial literacy.

Without such measures, both households and the state risk remaining trapped in a cycle of borrowing and financial stress, limiting Nepal’s long-term economic transformation.