KATHMANDU: With only four days remaining before the government unveils the budget for the upcoming fiscal year, discussions over a possible salary increase for civil servants have intensified.
Many observers expect the single-party government led by the Rastriya Swatantra Party (RSP), formed with the backing of nearly a two-thirds majority in Parliament, to introduce a budget with new policy priorities and reforms.
Amid growing speculation, there have been discussions that the government may increase salaries for government employees. However, the state of government revenue collection suggests that implementing such a decision may not be easy.
According to Section 27 of the Civil Service Act, 1993, the Salary and Benefits Review Committee is required to review salaries, allowances, and other benefits every three years based on revenue growth, total staffing levels, and inflation adjustments, including cost-of-living allowances.
Previously, then Finance Minister Janardan Sharma had increased civil servants’ salaries by 15 percent through the fiscal year 2022/23 budget.
Under the legal provision, salaries should also have been revised in the previous fiscal year. However, former Finance Minister Bishnu Paudel did not increase salaries, citing a lack of financial resources.
Data from the Nepal Rastra Bank show that average consumer inflation stood at 7.74 percent in fiscal year 2022/23, 5.44 percent in 2023/24, and 4.06 percent in 2024/25. Inflation during the first nine months of the current fiscal year, up to mid-April, stood at 4.47 percent.
Government revenue has increased by around 23 percent over the past three fiscal years, and further growth is expected in the current fiscal year. However, the increase has still not been sufficient to fully cover the government’s operational expenditures.
According to sources, the Salary and Benefits Review Committee has recommended a salary increase for civil servants this year. However, employee unions have remained largely silent after the current RSP-led government abolished party-affiliated trade unions that traditionally exerted pressure on the government.
The government has also been pursuing expenditure-cutting measures, including reducing the number of ministries and curbing public spending.
As the valuation process of state-owned enterprises moves forward, the government is also expected to announce new decisions through the budget regarding loss-making public institutions. Such measures could help reduce the government’s recurrent expenditure burden.
Despite this, the government still faces the challenge of managing additional revenue if salaries are increased.
Officials said discussions within the Ministry of Finance regarding salary hikes have been positive, although indications suggest that any increase may not meet employees’ expectations.
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