Case Study, Paper

Nepal: Budget Credibility and the Sustainable Development Goals

This brief presents analysis of Nepal’s Federal Government spending in six key sectors that relate to nine Sustainable Development Goals (SDGs), examining budget credibility trends in 2018, 2019 and 2020. The analysis builds on the methodology of SDG indicator 16.6.1, which recognizes the importance of budget credibility, but is currently reported only at the level of the aggregate budget without exploring the variation in budget credibility patterns in the six key sectors. The sectors covered here are agriculture and food, education, environment, health, social protection, and water and sanitation. This brief also compares budget deviations and the share of government spending in each sector to the progress reported on achieving the related SDG as reported in the SDG Index 2021 to better understand how these spending patterns relate to Nepal’s efforts to achieve the SDGs.

Overall, we found that the government increased recurrent expenditure while reducing capital expenditure in recent years. This shift may impact government efforts to achieve the SDGs, where investments in capital expenditure help promote productivity growth, build infrastructure and achieve targets such as SDG 8: Decent Work and Economic Growth. However, there appear to be major loopholes when it comes to procuring services. Despite legal and institutional frameworks, public entities procure without approved procurement plans, preventing proper utilization of public expenditure and creating opportunities for corruption.

The relationship between poor budget credibility and the government’s efforts to achieve the SDGs is important because:

  • Nepal underspends its budget plans annually; 2022 is the third consecutive year that the country’s budget has been revised downward.
  • The ratio of capital expenditure as compared to recurrent expenditure is very low as it influences program implementation.
  • Nepal does not have a separate SDG-related budget allocation and actual expenditure by the MOF in its Budget Speech and Red Books.
  • A lack of parliamentary approval enables the poor institutional practice of shifting budget from one budget head to another budget head.
  • The perceived integrity of Nepal’s budget is essential for accessing foreign loans and aid.
  • SDG action plans are executed through government plans via the country’s annual budget, and mismatches between the budget and plans will hamper and hinder efforts to achieve the SDGs.

Budget expenditure and planned actions have direct correlations with SDG goals set out by the government. Failing to meet one directly impacts progress on SDG actions. According to the SDG Index, climate change, clean water and sanitation are on track, whereas other areas require significant attention. Policy-level, legal and institutional frameworks should be prepared to make the implementation of the SDGs effective and systematic.

This publication is a part of Connecting Budget Credibility to the Sustainable Development Goals.


Nepal: Budget Credibility and the Sustainable Development Goals

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Case Study, Paper

Connecting Budget Credibility to the Sustainable Development Goals

To explore the connections between budget credibility patterns and efforts to achieve the SDGs, IBP coordinated investigations into budget credibility patterns in government budgets by partners and IBP staff members in 13 countries from 2018 to 2020. This paper synthesizes the findings across the 13 country case studies, highlighting cross-cutting themes and trends that emerge from the data and analysis.
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