Finance Minister Rameshwar Khanal has cut a large portion of Nepal’s development budget, affecting local infrastructure projects, while giving massive tax exemptions to Dolma Impact Fund, a company he has long advised.
This year, the government slashed over NPR 1.25 trillion in capital spending, citing a lack of resources. Roads, schools, health posts, and other local projects have stalled, leaving communities without basic infrastructure.
At the same time, Dolma Impact Fund, which has invested around NPR 15 billion (USD 108 million) in 16 Nepali companies across hydropower, IT, healthcare, and e-commerce, will pay no capital gains tax on profits from share sales. For example, shares bought for NPR 26 million in Makar Jitumaya Suri Hydropower now yield a profit of NPR 117 million. The government has exempted the fund from paying the NPR 29.44 million tax owed.
The Ministry of Finance says this exemption applies for six months on older investments, even though the double taxation treaty with Mauritius, under which the fund invests, has been canceled.
The biggest controversy is the clear conflict of interest. Khanal has been a paid advisor to Dolma for years and did not disclose this relationship after becoming minister. Experts say giving tax breaks to a company you personally advise is a misuse of power.
Before becoming minister, Khanal also recommended tax benefits for private equity and venture capital firms, a move that would clearly benefit Dolma. Legal and tax experts warn that this decision could face court challenges, citing past disputes like the Ncell tax case.
Local officials and provincial governments have criticized the decision. “There is no budget to repair roads or build schools, yet foreign funds get billions in tax relief,” said one village chairman. Analysts say that diverting funds meant for public development to benefit a private company undermines trust in the interim government.
Khanal defended the move, calling it justified foreign investment. However, critics argue that using a Mauritius-based shell company, where the actual investment is minimal, raises serious transparency concerns.
This decision has sparked questions about the interim government’s priorities and ethical standards. Taking money from development budgets to favor a minister’s former consultancy challenges both public trust and government accountability. Analysts warn that such actions could damage the credibility of Nepal’s governance system.
