KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
The challenges facing Nepal’s economy are multifaceted, highlighted by the significant ten-hour daily closure of Tribhuvan International Airport (TIA) for upgrades, which is expected to disrupt tourism and critical sectors such as transportation and hospitality during a crucial recovery period following devastating floods that caused an estimated Rs46.68 billion in losses.
While TIA undergoes necessary renovations to enhance infrastructure, this closure has led to soaring ticket prices due to supply-demand imbalances, further straining both tourists and locals reliant on international travel.
Conversely, Gautam Buddha International Airport (GBIA) is seeing growth with the introduction of three international airlines, enhancing connectivity and potentially stimulating local economic development.
Additionally, fluctuations in foreign currency exchange rates, with rising values for the US Dollar and Euro against the Nepali Rupee, could impact import costs and remittances, adding another layer of complexity to the economic landscape.
As Nepal navigates these challenges, effective management of airport operations, disaster recovery, and economic policies will be essential for fostering stability and growth.
Economic implications of TIA closure
The ten-hour daily closure of Tribhuvan International Airport (TIA) is expected to significantly impact Nepal’s economy, which is already struggling due to recent floods.
As the country’s main international gateway, this disruption is likely to deter tourism and negatively affect key sectors such as transportation, hospitality, and telecommunications.
Given the importance of tourism to Nepal’s economy, this closure may further slow recovery efforts during a critical period.
Additionally, the sharp rise in ticket prices—some routes seeing increases of up to fourfold—reflects the growing imbalance between supply and demand in the travel market.
This price surge not only impacts tourists but also affects Nepalis who depend on international travel for work.
The long-term effects on growth will hinge on how the government manages this situation while addressing the needs of the tourism sector.
GBIA welcomes three international airlines
The operation of three international flights at Gautam Buddha International Airport (GBIA) is a promising development for enhancing Nepal’s connectivity and economic potential.
With Jazeera Airways bringing in 171 passengers and Fly Dubai and Nepal Airlines also conducting flights, GBIA is positioning itself as a viable hub for international travel.
Jazeera Airways will operate three flights a week, while Fly Dubai will offer daily services, and Nepal Airlines will run three weekly flights to Dubai.
This increased connectivity not only provides more travel options for passengers but also has the potential to stimulate local economic growth by attracting tourists and facilitating trade, thereby playing a crucial role in revitalizing Nepal’s tourism sector.
Upgrading work of TIA begins
The commencement of upgrading work at Tribhuvan International Airport (TIA) represents a critical investment in enhancing Nepal’s aviation infrastructure, but it also poses significant challenges for travelers and the economy.
The Civil Aviation Authority of Nepal (CAAN) is expanding essential facilities, including the parallel taxiway and both the international and hangar aprons, to improve operational efficiency and accommodate growing air traffic.
However, the decision to close the airport for 10 hours daily from 10 PM to 8 AM for the next five months could disrupt flight schedules and adversely impact tourism and business activities during this period.
Dollar and Euro exchange rates increase
The update from the Nepal Rastra Bank (NRB) regarding foreign currency exchange rates for November 9, 2024, highlights a modest increase in the values of both the US Dollar and Euro against the Nepali Rupee.
With the US Dollar’s buying rate rising to 134.71 rupees and the selling rate to 135.31 rupees, alongside the Euro’s increase to a buying rate of 145.42 rupees and a selling rate of 146.07 rupees, these fluctuations reflect ongoing trends in the global currency market.
Such changes may impact various sectors in Nepal, particularly import-dependent businesses that could face higher costs for foreign goods and services.
Additionally, as the exchange rates shift, remittances from abroad may also be affected, influencing the financial landscape for many households relying on these funds.
The NRB’s adjustments indicate a need for stakeholders to remain vigilant in navigating the implications of fluctuating currency values on the broader economy.
Floods cause estimated Rs46.68 billion in losses
The heavy rainfall and subsequent floods and landslides in late September have had a devastating impact on Nepal’s economy, with losses now estimated at Rs46.68 billion—nearly three times higher than initial projections.
The National Disaster Risk Reduction and Management Authority’s preliminary assessment underscores the severe damage to physical infrastructure, which has far-reaching implications for recovery and development efforts.
Particularly alarming is the record-breaking rainfall in Kathmandu, where the Tribhuvan International Airport recorded 239.7 millimeters in just 24 hours, marking the highest levels since 2002.
As Nepal grapples with the aftermath, the need for robust disaster management and infrastructure resilience strategies becomes increasingly critical to mitigate future risks and safeguard economic stability.
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