KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
The recent wave of institutional audits, policy reviews, and financial performance updates in Nepal reflects both the country’s evolving economic landscape and the institutional challenges hindering sustainable growth.
Nepal Rastra Bank’s launch of its first digital audit marks a major step toward modernizing banking oversight and addressing cybersecurity risks, while its investigation into misused subsidised loans exposes persistent flaws in credit targeting and accountability.
At the same time, regulatory agencies like the Nepal Securities Board are moving to rein in IPO malpractices and restore market integrity, particularly in the hydropower sector, which has shown strong recovery in earnings.
Despite growth in revenue collections and real estate transactions, the government continues to grapple with inefficiencies—such as idle local funds and unstable EV tax policies—that undermine fiscal discipline and investor confidence. These developments underline the need for institutional reform, policy consistency, and stronger governance to unlock Nepal’s full economic potential.
NRB launches first digital audit of banks to improve cybersecurity and consistency
For the first time, Nepal Rastra Bank (NRB) has initiated a digital audit of commercial banks to enhance cybersecurity and ensure operational consistency. The initial phase involved inspections of Nabil Bank, Global IME Bank, and Nepal Bank Limited. The audit examines systems for online banking, ATMs, mobile apps, card usage, and cybersecurity measures. NRB’s goal is to identify risks, evaluate compliance with digital policies, and address inconsistencies arising from differing internal technologies used by banks. Eventually, all banks will undergo such reviews to protect consumers and standardize digital services in Nepal’s evolving banking sector.
Over one-third of subsidised loans misused, NRB audit reveals
An evaluation of interest-subsidised loans under a scheme managed by Nepal Rastra Bank revealed that up to 36% may have been misused, according to the Auditor General’s 62nd report. Field reviews of 31,664 borrowers showed that Rs 6.35 billion in loans were misused by 7% of recipients, 12% lacked proper target group classification, and 6% received duplicate loans.
In total, misuse of Rs 21.25 billion is suspected. The report criticizes the scheme for poor targeting, insufficient planning, and lack of transparency. Although Rs 187 billion has been disbursed, officials warn that without reforms, long-term success remains uncertain.
Hydropower earnings rise to Rs 28.81 billion, sector sees EPS growth
Hydropower firms in Nepal earned Rs 28.81 billion in electricity sales during the third quarter of fiscal year 2081/82, an 11.99% increase from the same period last year. Upper Tamakoshi was the top earner with Rs 4.27 billion, followed by Sanima Middle Tamor and Green Ventures.
Sahas Urja reported the highest earnings per share (EPS) at Rs 29.42. Of 89 listed hydropower companies, 58 had positive EPS, indicating stronger profitability. However, 31 companies still reported losses, with Menchhyam Hydro performing the worst at negative Rs 45.03 EPS, despite the sector’s overall improving trend.
Nepal Securities Board targets IPO misconduct to build a transparent market
The Nepal Securities Board has taken action to eliminate irregularities in the Initial Public Offering (IPO) process and create a fairer investment environment. Due to the increasing trend of short-term profit-taking, the board will now review company financials more closely, enforce longer lock-in periods, raise IPO issuance limits, and strictly monitor how raised capital is used.
Authorities have found that promoters and brokers often manipulate share prices in small-cap firms. These reforms, which are expected to primarily impact hydropower companies, have drawn resistance from some firms. Anti-graft institutions and parliamentary panels have also pushed for stricter regulation.
EV tax policy remains unstable despite government’s push for green transport
Although the government has promoted electric vehicles (EVs) as eco-friendly alternatives, it has failed to maintain a stable tax policy. From fiscal year 2076/77 to 2081/82, successive finance ministers have frequently revised customs and excise rates—sometimes drastically increasing them to restrict imports, and at other times slashing them to benefit luxury EVs.
This unpredictability has raised concerns among businesses and consumers, especially ahead of the 2082/83 budget. While EV usage has increased, benefiting the environment and the auto industry, experts warn that inconsistent taxation could stall progress. Stakeholders are calling for a balanced, long-term EV policy.
Over Rs 150 billion in local government loans unused, government pays Rs 7.86 billion in interest
More than Rs 150 billion allocated to local and provincial governments through the federal government’s cash transfer programs remains unspent, the Auditor General’s 62nd report shows. The Ministry of Finance borrowed these funds at 5.27% interest but has already paid Rs 7.86 billion in interest.
As of fiscal year 2080/81, Rs 69.82 billion is stuck in provincial accounts, while Rs 79.43 billion is idle at the local level. The report blames poor implementation of financial planning under Rule 29 of the fiscal procedures law and urges better use of existing funds before resorting to further borrowing.
Hydropower firms bounce back, 58 post profits by Q3
Nepal’s hydropower industry is showing signs of recovery as 58 companies reported profits in the third quarter of the current fiscal year. Rising electricity sales—up 12% to Rs 28.81 billion—helped generate a net sector profit of Rs 1.44 billion, a strong comeback from last year’s loss of Rs 1.05 billion.
Of the 58 profitable firms, 27 saw year-on-year earnings growth. Sahas Urja led the sector with Rs 834 million in profits, while Upper Tamakoshi posted the largest loss of Rs 2.06 billion. Altogether, 31 companies remained in the red, with combined losses of Rs 4.18 billion.
Real estate market recovers after three-year slowdown; Baisakh 2081-82 records highest activity since 2078
Nepal’s real estate sector has started to rebound after facing a three-year slump. A mix of declining interest rates, improved infrastructure, and relaxed government policies has spurred this revival. In Baisakh of fiscal year 2081-82, real estate transactions across the country reached 52,423—the highest since 2078—marking a 5.2% increase compared to the previous month.
Revenue collection also climbed by 11.34%, totaling Rs 4.54 billion. Over the first ten months of the fiscal year, land revenue stood at Rs 37.76 billion. Easier loan conditions and supportive measures from the government have helped restore investor trust and encourage market activity.
Nepal loses nearly Rs 4 billion to EV tax fraud, says Auditor General
The Office of the Auditor General has disclosed that Nepal lost close to Rs 4 billion in revenue due to tax evasion in electric vehicle imports. The fiscal year 2080/81 report found that importers falsely declared EVs with 100–200 kW motors as under 100 kW to qualify for lower taxes.
Most violations occurred at Rasuwagadhi and Tatopani customs posts. The report recommends recovering the lost revenue and reviewing tax waiver policies that disproportionately benefit wealthier buyers while excluding the middle and lower-income population.
Birgunj customs collects Rs 140.42 billion in 10 months, hits 64% of target
In the first 10 months of fiscal year 2024/25, the Birgunj Customs Office generated Rs 140.42 billion in revenue, achieving 64.13% of its annual goal of Rs 218.95 billion. Chief Customs Officer Deepak Lamichhane noted consistent monthly growth, with the highest revenues in Baishakh (Rs 15.72 billion) and Poush (Rs 15.47 billion).
Monthly collections ranged between Rs 11.10 billion and Rs 15 billion. Officials remain optimistic about reaching the full-year target within the next two months due to the current upward trend in revenue collection.
Melamchi water reaches Balaju and Nagarjun as KUKL expands network
Kathmandu Upatyaka Khanepani Limited (KUKL) has begun supplying treated water from the Melamchi project to Balaju and Nagarjun municipalities. New service areas include Lazimpat, Buspark, Chapakot, Changali, Khokana, and Nagarjun’s wards 1 and 2. To strengthen water delivery, 3,811 meters of pipeline are being laid along the Ring Road and in Balaju.
When fully operational, the system is expected to provide 270 million liters of water per day to Kathmandu Valley. With support from the Ministry of Water Supply, KUKL is working to prevent delays and address the valley’s chronic water shortage.
Kakadbhitta-Laukahi road project races to complete diversion before monsoon
With the monsoon nearing, the Kakadbhitta-Laukahi Road Project (Eastern Section) in Damak has ordered urgent completion of diversion work on the East-West Highway. Despite receiving Rs 10 billion in funding supported by the Asian Development Bank, only 19% of road construction and 17% of bridge work has been completed.
Project head Sunil Babu Pant warned that flood damage and traffic issues are likely if delays persist. Residents are increasingly concerned about safety and stalled progress. Authorities have deployed a rapid response team and confirmed that construction will continue through the rainy season.
Babai irrigation project reaches 77% completion amid financial and contractor delays
The Babai Irrigation Project in Bardiya, aimed at irrigating 36,000 hectares, has reached 76.5% in physical progress and 77.5% in financial implementation. With just over a year left until the fiscal year 2025/26 deadline, around 13.5% of work remains.
The national pride project, initially budgeted at Rs 18.96 billion, has spent Rs 14.7 billion so far, and costs may rise to Rs 22 billion if delays continue. While the system currently serves 26,000 hectares, work continues on 91 km of main and 313 km of branch canals. Some contracts are still pending or being reassigned.
Auditor General urges probe into insurance cross-holdings to prevent conflicts of interest
The Auditor General’s 62nd report calls for an independent investigation into cross-holdings among founding shareholders of insurance companies, citing regulatory conflicts. The report asks the Nepal Insurance Authority to monitor ownership
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