Bhote Koshi floods to raise spending obligations and strain government revenue, says Finance Ministry

Kathmandu, October 14

The Finance Ministry has projected that floods in the Bhote Koshi River will affect revenue collection, increase government spending obligations and put additional pressure on available resources in the current fiscal year 2026/27.

In its annual economic bulletin for fiscal year 2025/26, the ministry said the closure of the Rasuwa-Tatopani border crossing, tax exemptions and increased spending on relief and reconstruction would further strain government finances.

The ministry estimates that relief and reconstruction costs following the floods will exceed one-third of the budget allocated for such purposes.

The floods on August 26 are estimated to have disrupted 431 megawatts of electricity generation, equivalent to around 10 per cent of Nepal’s installed power generation capacity.

Damage to tourism and infrastructure has also created reconstruction needs estimated at around 11 per cent of gross domestic product (GDP), or Rs 723 billion, according to the ministry.

The government had set a target of achieving 7 per cent economic growth in the current fiscal year. However, the ministry now estimates growth will range between 3.5 and 4 per cent, making the original target unlikely to be met.

The World Bank has projected economic growth of 3.7 per cent, while the Asian Development Bank has forecast growth of 4.1 per cent.

The ministry expects inflation to remain within the government’s target range.

The National Statistics Office had earlier estimated that Nepal’s economy grew by 3.85 per cent in fiscal year 2025/26.

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