Higher Education Financing in Nepal: A Mathematical Analysis of Government Expenditure, Enrolment, and Educational Outcomes

Abstract

Although Nepal’s higher education system has expanded rapidly, public financing remains low relative to regional and global benchmarks. This study examined the relationships between government expenditure on higher education, student enrolment, and educational outcomes in Nepal from 2010 to 2024. Data compiled from University Grants Commission reports, Ministry of Finance budget documents, World Bank EdStats indicators, and Nepal’s labour and population data were analyzed using descriptive statistics, compound annual growth rates, Pearson correlation, ordinary least squares regression, log-linear elasticity estimation, and a Cobb–Douglas-type educational production function. Nominal higher education expenditure increased at a compound annual rate of approximately 19.3%, exceeding annual GDP growth of 10.8%. However, the tertiary gross enrolment ratio rose from single digits to approximately 15–19%, remaining below the South Asian average. The estimated enrolment–expenditure elasticity was 0.21 (p < .001), indicating that a 10% increase in real higher education spending was associated with a 2.1% increase in enrolment. This limited responsiveness is consistent with nonfinancial constraints involving institutional capacity, geographical access, and labour-market signalling. Expenditure per student was a strong predictor of graduation and pass rates, with respective model R² values of .92 and .90. These findings suggest that financing quality and intensity warrant attention alongside aggregate budget growth when addressing access and educational outcomes. The study provides a quantitative basis for reforming Nepal’s higher education financing through performance-based grant allocation, need-based scholarships, and revenue diversification through cost-sharing and research grants.