KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s economic landscape this week reflects a mix of structural weaknesses and pockets of resilience, with regulatory gaps, fiscal stress, and infrastructure shortcomings intersecting across sectors. The booming yet poorly regulated EV market highlights rising safety risks and tax evasion, while industrial dependence on expensive generators a decade after the end of load-shedding underscores persistent failures in transmission and distribution.
Governance challenges remain evident as 15 Madhesh local governments still lack budgets, and a long-pending anticipatory bail bill stagnates amid political instability. The financial sector faces mounting pressure, with loan defaults prompting plans to soften blacklisting rules and Bangladeshi auditors completing a major review of Nepal’s top banks.
Capital markets show contrasting trends: the NEPSE index continues to slide despite strong post-listing rallies in newly listed stocks. Meanwhile, social and infrastructure developments offer some optimism, from progress on the Tila Hydropower Project and the revived Dudhuwa Canal to soaring orange sales in Tanahun, growing eco-tourism in Myagdi, and the continuing flow of trekkers across Thorong La despite harsh winter conditions.
Nepal’s growing EV market faces safety gaps, tax fraud and regulatory void
Nepal’s fast-expanding electric vehicle market has turned disorderly due to the absence of standards, fitness testing, and regulatory oversight. EV operators charge diesel-equivalent fares without issuing tickets, causing long queues and charging delays, while many vehicles use substandard parts. Importers often under-report motor capacity to evade taxes, and Nepal lacks equipment to verify specifications. Poor-quality Chinese EVs, weak safety systems, and limited service centres have been linked to increasing accidents. Without EV-specific standards or regulations, Nepal risks becoming a dumping site for low-grade vehicles.
Despite market decline, four newly listed stocks soar over 40%
The NEPSE index dropped 44.86 points this week to close at 2,631.17, down 1.68% from the previous week. Yet four recently listed companies posted exceptional gains of more than 40%. Sagar Distillery rose 46.40%, Jhapa Energy 46.39%, Swastik Laghubitta 46.38%, and Srinagar Agritech 47.38%. All four were new entrants to secondary trading following their IPOs, suggesting strong investor enthusiasm for fresh listings even as the broader market trended downward.
Investment of NPR 7.57 billion planned for 38MW Tila hydropower project
The 38.07MW Tila Hydropower Project—located between Jumla’s Tila Rural Municipality and Kalikot’s Tilagufa Municipality—has advanced with the completion of the first public hearing on its Initial Environmental Examination (IEE). The project is estimated to cost over NPR 7.57 billion. Designed with a discharge of 52.51 cubic meters per second, it will evacuate electricity through a 30.2-km, 132kV transmission line to the Jumla substation. It requires 7.59 hectares of land, including 4.77 hectares of forest. Local communities are expected to benefit from employment, royalties, community programs, and expanded business opportunities, though 34 households will be directly affected.
15 Madhesh local governments still without budgets five months into fiscal year
Fifteen local levels in Madhesh Province have yet to endorse their budgets nearly five months after the start of the fiscal year. Although local bodies are legally required to announce budgets by Asar 10 (June 24), political disagreements have again delayed the process. Last month, only 28 local governments managed to pass their spending plans. Budget delays are recurring: in FY 2024/25, 32 local levels nationwide missed the deadline, 25 of which were from Madhesh. Without approved budgets, local bodies cannot collect revenue, pay staff, implement development projects, or access federal grants—risking mounting arrears and stalled local development.
Ten years after end of load-shedding, industries still depend on expensive generators
A decade after Nepal ended power cuts, industries continue to face unreliable electricity supply and remain heavily dependent on costly generators. A CNI survey shows generator use has jumped from 56% of industries in FY 2079/80 to 72% in FY 2081/82. Manufacturing firms in particular struggle with unstable power, which limits output, raises costs, and discourages new investment. Generator reliance adds around 11% to operating expenses. Although Nepal produces surplus electricity and exports power, weak transmission and distribution systems prevent industries from receiving consistent supply, leaving the country’s productive sector still grappling with an energy-reliability crisis.
Government plans to soften blacklisting rules as loan defaults surge
The government is preparing to ease strict blacklisting provisions amid a sharp rise in loan defaults during the economic slowdown. Finance Minister Rameshwor Khanal and Nepal Rastra Bank acknowledge that the number of blacklisted borrowers—now approaching 200,000—has become unusually high, constraining credit and further weakening the investment climate. Industries argue that banks pushed distressed firms into blacklisting rather than offering post-pandemic restructuring, forcing many to shut down. Borrowers are currently blacklisted for missed payments, remaining out of contact, or issuing bounced cheques. Officials say relaxing the rules is necessary to revive lending, reduce financial risk aversion, and support economic recovery.
Lapsed life insurance policies rise while surrender numbers decline
Nepal’s life insurers are seeing an increase in policies not renewed on time. Data from the Nepal Insurance Authority show 1,217,702 life insurance policies remained unrenewed in the first four months of the fiscal year, up 0.97% year-on-year. The value of these lapsed policies reached NPR 3.677 billion, a 4.69% rise. Analysts cite low awareness, financial hardship, and poorly matched products as key causes. Meanwhile, policy surrenders decreased by 18.14% in number and 6.27% in value, widening the gap between policy retention and renewal.
Draft anticipatory bail law stuck amid ongoing political instability
Nepal’s proposed law on anticipatory bail—aimed at preventing arbitrary arrests—remains frozen due to persistent political uncertainty. The Ministry of Law, Justice and Parliamentary Affairs drafted the bill to allow individuals to seek bail before arrest when there is insufficient evidence or a risk of retaliatory detention. The proposal would amend the Criminal Procedure Code to let courts grant immediate protection while ensuring investigations are not compromised. Frequent arrests of bankers, business owners, and officials without adequate legal safeguards have heightened concerns over misuse of police authority. The delay leaves citizens vulnerable to unjust detention and reputational harm.
NEPSE slips 44.86 points as investors remain cautious after policy review
The Nepal Stock Exchange (Nepse) declined by 44.86 points (1.68%) last week after Nepal Rastra Bank’s first monetary policy review failed to lift market confidence. The benchmark index opened at 2,676.03 and closed at 2,631.17 over four trading days, fluctuating between a high of 2,694.89 and a low of 2,623.10—a volatility of 71.79 points. While finance, manufacturing, and mutual funds posted gains, life insurance (-3.44%) and banking (-3.04%) pulled the market down. Himalayan Reinsurance recorded the week’s highest turnover at Rs 669.44 million, and Sagar Distillery surged 46.40%. Weekly turnover dropped by 33.79% to Rs 21.51 billion, while market capitalization shrank by Rs 76 billion to Rs 4.417 trillion.
Bangladeshi auditors complete loan review of Nepal’s ten biggest commercial banks
A team from Bangladesh’s Howladar Yunus & Co., working with Nepal Rastra Bank, has wrapped up a comprehensive review of the loan portfolios of Nepal’s ten largest commercial banks. The review—part of IMF Extended Credit Facility requirements—assessed loan documentation, core banking systems, project progress, and repayment status. Banks examined include Global IME, Nabil, Nepal Investment Mega, Rastriya Banijya, Kumari, Laxmi Sunrise, Prabhu, Himalayan, NMB, and NIC Asia. Around 25 indicators were used to evaluate asset quality. The final report will be submitted soon, and any irregularities will be communicated to the respective banks for clarification and corrective action.
Tax Department says full audits continue under risk-based system
The Inland Revenue Department has clarified that full tax audits have not been stopped and are still being carried out under a risk-based model. An annual audit plan has already been implemented, and all audits are conducted in accordance with legal procedures. Multinational companies, banks, financial institutions, and firms approaching the four-year statutory audit deadline are prioritized as high-risk entities. Each year, roughly 2% of taxpayers are selected for comprehensive audits, which may be conducted anytime within four years under the Income Tax, VAT, and Excise Acts. These audits are triggered by mismatched declarations, suspicious transactions, complex business structures, or other risk flags to ensure efficient and targeted oversight.
India allows carrying INR 200 and 500 notes, but use in Nepal still barred
India has eased restrictions imposed after the 2016 demonetisation, permitting individuals to transport higher-denomination notes once again. According to the Reserve Bank of India, people may now carry INR 200 and INR 500 notes up to a limit of INR 25,000. However, these notes are still prohibited for everyday transactions. Nepal Rastra Bank has confirmed that Nepali citizens can hold and exchange such notes at banks, though they cannot yet use them in shops or markets within Nepal. The relaxation restores mobility of Indian high-value notes but does not lift their restriction on circulation.
NEA automates seven substations as part of move toward digital power grid
The Nepal Electricity Authority has automated seven older substations—Panchkhal, Banepa, Patan, Lainchaur, Balaju, Chapali, and Bhaktapur—linking them to a central control room at Minbhawan. The automation, supported by SCADA technology through the Syuchatar Load Dispatch Centre, is part of NEA’s plan to modernize the national grid. The remaining six substations in the project will be automated within two months. The initiative, funded by an ADB concessional loan of Rs 610 million, is expected to reduce power outages, improve real-time load management, cut operational costs, and lay the foundation for a smart grid. NEA plans to automate all 71 substations within 18 months.
Dudhuwa Canal construction resumes, set to irrigate 16,000 hectares year-round
Work on the long-delayed Dudhuwa Canal under the Sikta Irrigation Project has resumed, aiming to provide year-round irrigation for nearly 16,000 hectares of farmland. The first package includes structures and 24 km of canal for 7,271 hectares in Janaki and Khajura, while the second package—being built by Ramechhap Sherpa Construction—covers an 18 km stretch toward Hirminiya, serving 8,783 hectares. The project, with an investment exceeding Rs 1.12 billion, is expected to significantly boost the production of paddy, wheat, maize, and vegetables. Farmers have welcomed the progress and urged the government to ensure strict oversight to prevent delays and structural failures seen in the past.
Benikot farmers earn over Rs 20 million from bumper orange sales
Farmers in Benikot, Byas Municipality-13 of Tanahun, have earned more than Rs 20 million from orange sales this year after a season of strong yields and high demand. Traders purchasing directly from orchards have further boosted earnings. Farmer and schoolteacher Fal Bahadur Thapa alone sold oranges worth Rs 1.65 million, while many others earned between Rs 210,000 and Rs 400,000. More than 600 farmers now benefit from Tanahun’s expanding orange-growing initiative, supported by government funding for orchard care and new plantations. With improved disease management and better orchard practices, the district sold oranges worth Rs 425 million last year. Benikot’s produce is now widely popular across Nepal, strengthening Tanahun’s emergence as a regional orange hub.
Tourists continue crossing Thorong La despite severe winter cold
Trekkers are still braving harsh winter conditions to cross Thorong La Pass (5,416m) on the Annapurna Circuit, despite freezing temperatures and snow-covered paths. Police data show that 201 tourists entered Mustang via the pass on November 17 and another 98 by December 4. Although overall numbers have dropped, authorities report a steady flow of visitors. Improved road connectivity has shortened the traditional trek, though tourism advocates stress the need to preserve classic routes. Thorong La remains the busiest gateway to Mustang, attracting more than 13,000 trekkers annually. On December 4 alone, over 2,500 people visited Mustang, with Muktinath Temple receiving the majority of visitors.
Tulsipur farmer transforms village through commercial vegetable production
Purna Bahadur Chaudhary of Matera in Tulsipur-14 has become a model farmer after turning small-scale vegetable production into a successful commercial venture. Starting 25 years ago with 12 katthas, he now cultivates vegetables and rice on 2 bighas 15 katthas using a lift-irrigation system from the Babai River. His annual income has reached nearly Rs 1.4 million. Inspired by his success, about 30 other households have adopted vegetable farming, creating local jobs and reducing outward migration. Despite challenges like weak market access and fluctuating prices, Chaudhary stresses the need for stronger government support in irrigation, quality seeds, and marketing infrastructure.
Aaldanda becomes key stopover on Karbakeli Eco Trek in Myagdi
Aaldanda in Annapurna Rural Municipality-8, Myagdi, is rapidly emerging as a favoured rest point on the Karbakeli Eco Trek route to Ghorepani and Poon Hill. Situated at 2,620 metres, the area offers wide views of Dhaulagiri, Annapurna, Machhapuchhre, and Manaslu, surrounded by rhododendron forests rich in biodiversity. Tourism operators say both domestic and foreign visitors—including recent trekkers from South Korea—are making Aaldanda a regular stop. New investments, such as the Himalayan View Guesthouse, are improving accommodation options. Its strategic location also connects visitors to destinations like Mohare Danda, Kalidaha, and Tikot along the Annapurna–Dhaulagiri Community Eco Trail.
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