underspending of the budget coupled with reforms to raise revenues are likely to result in a lower

fiscal deficit in FY2019, compared with the previous year. Consolidated government revenues grew
by 17.5 percent (y/y) in the first eight months of FY2019. This growth was led by tax revenues,
especially, the value-added tax (VAT), and customs, income, and excise taxes. The recent reforms by
the government to increase tax revenues by removing VAT exemptions, raising taxes on luxury items
and high-earning households, and higher excise on tobacco and vehicles supported growth in tax
collection.

The signing of the protocol to implement the Transit and Transport Agreement with China will
enable Nepal to use China’s seaports and improve regional connectivity and transit (29th April 2019).
Nepal and China initialled the much-hyped protocol of the agreement, which was signed in March 2016
during Prime Minister KP Sharma Oli’s China visit, in Kathmandu on September 7.

Newly enacted laws including the Foreign Investment and Technology Transfer Act, the Public-
Private Partnership and Investment Act, and the Special Economic Zone Act will help ease
restrictions on foreign investment and reduce transaction costs.