KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s current economic landscape reflects a mix of cautious optimism and deep structural strains: while the NEPSE index gained modestly on improved macroeconomic signals and hydropower companies announced dividends amid significant new energy investments, sectors tied to domestic demand—especially real estate, insurance, and agriculture—show pronounced stress.
A slump in property transactions is reducing government revenue, and soaring non-performing loans, driven by political instability and weak credit discipline, are heightening financial-sector risks. The collapse of the Biratnagar Milk Supply Scheme and labour shortages in agriculture further expose vulnerabilities in rural and state-run systems.
Meanwhile, falling gold prices mirror global monetary pressures, and aggressive lending has put several banks in high-risk positions. Yet there are bright spots: foreign inflows from health and education services are rising, major petroleum and infrastructure projects are moving forward, secure digital services are expanding, and regulatory institutions such as the consumer court are becoming more active.
Overall, Nepal’s economy shows pockets of resilience but remains constrained by governance challenges, inconsistent project execution, and uneven sectoral performance.
NEPSE rises 14.56 points as improving economic indicators lift hotel and tourism stocks
The Nepal Stock Exchange (NEPSE) gained 14.56 points (0.57%) last week, supported by stronger macroeconomic signals highlighted in Nepal Rastra Bank’s latest update. The index opened at 2,545.73 and closed at 2,560.29, touching a weekly high of 2,580.09 and a low of 2,533.03. The hotels and tourism sector led with a 4.89% weekly rise, while finance, non-life insurance, and banking weakened. Sahas Urja recorded the highest turnover at Rs 1.16 billion. Sagar Distillery and Bandipur Cable Car shares jumped 61%, whereas Bhugol Energy dropped 20.80%. Weekly turnover reached Rs 20.41 billion, and total market capitalization grew by Rs 25 billion to Rs 4.298 trillion.
Real estate slowdown cuts government revenue in first four months of FY 2025/26
Nepal’s real estate sector continues to weaken, leading to a decline in government revenue, according to the Department of Land Management and Records (DoLMR). In the first four months of FY 2025/26, collections fell from Rs 3.2891 billion in Shrawan to Rs 2.745 billion by Kartik. Despite revisions to the Land Use Regulations, revenue has not increased as authorities hoped. In Kartik, the government collected Rs 213.447 million in service tax, Rs 156.296 million in registration fees, and Rs 997.884 million from capital gains tax. The figures signal a sustained downturn in property transactions across the country.
Govt funds hold over Rs 40 billion for employee benefits and services
A recent government assessment shows that 10 different funds overseen by the Ministry of Finance collectively hold more than Rs 40 billion designated for employee retirement plans, medical care, allowances, and other welfare services. These funds receive routine contributions from both the government and employees. The National Commercial Bank holds the largest share with Rs 25.71 billion, followed by the Agricultural Development Bank with Rs 12.20 billion. Other entities with smaller balances include Nepal Airlines (Rs 61 million), Public Service Broadcasting Nepal (Rs 42 million), the Deposit and Credit Security Fund (Rs 38 million), Medicinal Herbs & Processing Company Limited (Rs 7 million), and the Kathmandu Valley Water Supply Board (Rs 3 million). These reserves help sustain long-term financial security for government workers.
Rs 24.5 billion fuel pipeline projects move into implementation phase
Nepal Oil Corporation (NOC) and Indian Oil Corporation (IOC) have advanced two major petroleum pipeline and storage projects worth Rs 24.5 billion. The 50-km Siliguri–Jhapa pipeline will feed a newly planned storage site in Jhapa with capacity of 18,900 kiloliters, while the Amlekhgunj–Chitwan pipeline and Lothar terminal in Chitwan will add 91,900 kiloliters of fuel storage. India is contributing Rs 15 billion in grants, with NOC investing Rs 9.5 billion. Following land acquisition and design approvals, the projects aim to enhance fuel supply in eastern Nepal, cut transport costs, curb leakage, and strengthen distribution systems.
Political instability and post-protest fallout intensify Nepal’s non-performing loan crisis
Nepal’s banking system is experiencing a surge in non-performing loans (NPLs) following political uncertainty and disruptions linked to the recent Janajati (JeenJi) protests. Several businesses—citing protests, market shutdowns, flooding, and stalled land sales—have halted interest payments, including borrowers who were previously regular. As a result, the NPL ratio has climbed to 5.06% from 4.37% last year, surpassing Nepal Rastra Bank’s 5% risk ceiling. Factors behind the increase include economic slowdown, bank mergers, real-estate vulnerabilities, and poor credit oversight. Banks are responding with loan restructuring, more aggressive recovery efforts, AI-driven risk monitoring, and a shift toward safer lending. Regulators stress expanding access to credit for agriculture and SMEs to reduce overall risk.
Gold price declines Rs 8,000 per tola as strong dollar pressures global commodities
Domestic gold prices dipped by Rs 8,000 per tola last week, closing at Rs 241,700, down from Rs 249,700, according to FENEGOSIDA. Price fluctuations were notable throughout the week: a Rs 6,900 fall on Sunday, a Rs 500 rise Monday, a Rs 3,800 drop Tuesday, a Rs 2,800 rebound Wednesday, a Rs 700 increase Thursday, and a Rs 1,300 decline Friday. The fall in gold was driven by reduced expectations of further U.S. Federal Reserve rate cuts, a stronger dollar, and higher Treasury yields. Silver prices also eased by Rs 185 per tola, ending at Rs 3,100, reflecting a broader investor shift away from precious metals.
Aggressive lending pushes banks into high credit-risk territory, experts warn
Nepal’s banking sector faces heightened credit risk as six of the country’s 20 commercial banks have loaned out more than 80% of their deposits. Prime Bank has the highest credit-deposit ratio at 86.26%. While elevated CD ratios can raise profits, they also increase liquidity stress and potential default risks. Experts recommend diversifying loan portfolios, adopting cash-flow-based lending evaluations, monitoring NPLs more closely, and maintaining adequate capital buffers. Better digital banking systems, improved customer transparency, and alignment with government directives are also advised. Regulators emphasize disciplined lending and long-term investment strategies to safeguard depositors and preserve financial stability.
Foreign students and patients bring rising inflows as Nepal grows as a regional service hub
Nepal is attracting more international students and medical patients, generating significant foreign currency income. In the first quarter of FY 2082/83, the country earned NPR 85.52 million from education and health services. Foreign patients alone spent NPR 11.94 million—twice the amount Nepalis spent abroad for treatment. Patients from China, India, Bangladesh, Bhutan, and Thailand seek care for eye, cancer, cardiac, dental, and kidney treatments. Foreign students contributed NPR 73.27 million in tuition and living expenses, reflecting increased trust in Nepal’s academic institutions. Experts recommend further improvements in accreditation, transparent fee structures, streamlined visa and admission systems, and maintaining high-quality service standards to boost Nepal’s position as a regional center for health and education.
IBN clears Rs 93.40 billion investment for Betan Karnali and advances major hydropower projects
The Investment Board Nepal (IBN) has approved an investment of Rs 93.40 billion for the 439 MW Betan Karnali Semi-Reservoir Hydropower Project. A meeting chaired by Prime Minister Sushila Karki formed a negotiation team to draft the Project Development Agreement. The Board also endorsed a draft generation licence for the 669 MW Lower Arun Project and moved to seek Cabinet approval for the Direct Agreement of the 900 MW Arun-III project. Additionally, the survey licence for the 800 MW West Seti project was extended. The Board advanced an MoU and survey licence for a Rs 16 billion Auto Service Eco-Industrial Park and approved staffing and regulatory adjustments.
United Ajod Insurance posts heavy Q1 loss as governance and risk systems face scrutiny
United Ajod Insurance Limited reported a severe net loss of NPR 1.51 billion in the first quarter of FY 2082/83—nearly eight times greater than last year’s figure. Expenses of NPR 5.79 billion sharply outpaced income of NPR 3.63 billion, while net claims surged to NPR 4.07 billion. Key indicators, including an EPS of –26.18 and a net worth per share of NPR 169.49, point to major financial stress. The company’s reinsurance assets, retained earnings, and cash reserves have also fallen significantly. Analysts attribute the crisis to poor underwriting practices, weak claims oversight, and ineffective reinsurance arrangements rather than damages linked to Gen Z protests. Experts caution that without an urgent overhaul of management and controls, the insurer risks sliding into a high-risk category.
Kul Man Ghising inspects long-delayed Kamala Bridge, commits to finishing by 2026
Energy, Physical Infrastructure, and Urban Development Minister Kul Man Ghising, along with Minister Bablu Gupta and senior officials, visited the long-stalled Kamala Bridge project linking Siraha and Dhanusha along the Postal Highway. The contract—awarded to Pappu Lumbini JV in 2011 for Rs 249.1 million—was originally set for completion in 2014 but has now been extended eight times. With only 83% of construction finished, locals continue to face travel difficulties due to detours. Ghising promised to speed up the remaining work and look into possible irregularities. After flood damage in 2021, a revised design was approved. The project is now expected to be completed and operational by July 2026.
Fourteen hydropower firms declare dividends for FY 2082/83
A total of 14 hydropower companies have announced cash and bonus-share dividends from their FY 2082/83 profits. Sahas Urja has the highest payout at 22.1053% (21% bonus and 1.2053% cash). Mid Solu and Sikles Hydro follow with 15.789% each. Arun Valley has declared 8.421%, Century Energy 35%, and Nepal Hydro Developer 9.47%. Companies including Super Madi, Ngadi Group Power, Barun, Singgati, Hilton, Universal Power, Bhagwati, and Mountain Energy have announced payouts ranging between 5% and 21.0526%. Several firms have set book closure dates to identify shareholders eligible for dividends and AGM participation.
Security Printing Center delivers first batch of new QR-code driving licences
The Security Printing Center has handed over its initial batch of 520 newly formatted driving licences to the Department of Transport Management following successful testing. Around 1,200 more licences are currently being printed in the second phase. Under the agreement signed on November 12, a total of 1.2 million licences will be issued. The new licences incorporate 34 security features, including QR codes and six layers of advanced protection. The Center will soon begin printing postage stamps, citizenship documents, internal fee stickers, land ownership papers, and visa stickers, expanding Nepal’s secure printing capabilities.
Labour shortages and inadequate mechanisation hinder paddy harvest in Morang
Farmers in southern Morang are struggling to complete paddy harvesting due to a severe shortage of agricultural labourers and limited availability of mechanised equipment. With many local workers migrating abroad—including to India and Gulf countries—farmers are waiting in long lines for harvester machines, which cannot keep up with the demand. Traditional labour communities have also moved away, worsening the situation. Although harvesters can cut paddy and separate grain, they do not collect straw, leading many farmers to burn it before planting mustard. Persistent rainfall has further delayed harvesting. With too few machines and overloaded operators, growers fear significant crop losses, showing how partial mechanisation has created new agricultural challenges.
Consumer court records steady increase in cases this fiscal year
The consumer court system, implemented last year, continues to see a gradual rise in complaints. In the current fiscal year, eight new cases have been filed—five related to medical negligence, one involving home and interior services, one concerning vehicle quality, and one linked to software issues. Nine unresolved cases from FY 2081/82 were carried forward, bringing the total caseload to 17. Four cases have been settled so far, while 13 are still pending. The upward trend reflects increasing public awareness of consumer rights and the court’s expanding role in resolving disputes across diverse sectors.
Biratnagar Milk Supply Scheme nears collapse as farmers stop deliveries over 200-day dues
The Biratnagar Milk Supply Scheme under the Dairy Development Corporation (DDC) is on the verge of collapse after farmers halted milk deliveries, saying they have not been paid for nearly 200 days. The scheme now owes approximately Rs 180 million. Several chilling centres in Ilam—such as Puwakhola, Phikkal, and Laxmipur—have shut down, though they previously collected more than 3,400 litres daily. Only seven of the original 11 centres are still functioning. Milk collection has plunged from 200,000 litres five years ago to just 13,000 litres today. Farmers are turning to private dairies and local processors, raising concerns about the survival of the government-run scheme and the livelihoods dependent on dairy farming.
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