KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Despite signs of economic momentum across key sectors in Nepal—highlighted by a record-breaking stock market rally, major hydropower connectivity milestones, and a historic Rs 20 billion agriculture FDI from China—the country continues to face structural weaknesses undermining its investment climate and growth potential.
While foreign direct investment (FDI) commitments rose slightly, actual inflows have plummeted, largely due to bureaucratic inertia, tax uncertainty, and weak infrastructure. The situation is compounded by climate-induced agricultural distress, delays in vital infrastructure like the Seti bridge, and regulatory lapses in sectors from insurance to electricity.
Simultaneously, efforts to improve digital connectivity, healthcare infrastructure, and rural tourism point to ongoing reform, but experts warn that without coherent national strategies, improved oversight, and inclusive policy execution, Nepal’s development gains could remain fragile and uneven.
Nepal sees slight 5% increase in FDI commitments
Foreign direct investment pledges in Nepal rose by 5% in fiscal year 2080/81, reaching Rs 64.96 billion across 840 proposed projects. Despite recent reforms—such as allowing venture fund-based investment—analysts point to ongoing tax uncertainties, bureaucratic red tape, and regulatory hurdles as obstacles. China and India remain the top sources of investment, with services and tourism drawing the most attention. However, actual FDI inflows dropped sharply to just $57 million in 2024, a 69% decline compared to 2019, according to UNCTAD. Experts stress the need for better infrastructure, tax clarity, and a more investment-friendly environment to attract major projects.
Pokhara–Jamune road 55% complete; Seti bridge faces construction delays
Construction progress on the Pokhara–Jamune section of the Pokhara–Muglin highway has reached 55.10% physical and 42.50% financial completion. Out of the 38.88 km stretch, 37.70 km has already been blacktopped. While 11 of 13 bridges are complete, the Bijaypur and Seti bridges are still under construction. The Bijaypur bridge stands at 60% completion, while work on the Seti bridge, a cable-stayed design handled by Rasuwa Construction, is only 48% done due to design issues and obstructions. The broader project—being executed by China’s Anhui Kaiyuan with ADB support—is expected to be finished by this winter, barring further setbacks.
Chinese company receives approval for Rs 20 billion buffalo meat export plant in Nepal
Nepal’s Department of Industry has greenlit a Rs 20 billion foreign direct investment (FDI) proposal from China’s Chengdu Jian Co. Ltd. to build the country’s largest buffalo meat processing and export facility. Developed in partnership with Himalayan Food International and Shanghai Ziyan Food Co., the project will feature a modern slaughterhouse and a buffalo-rearing center in Sindhuli. Construction is set to begin on August 17. The facility, spanning 85 bighas, will have the capacity to process 2.7 million metric tonnes of meat annually, aimed primarily at exports to China. Project partner Dr. Naveen Kumar Sharma stated that this venture is part of a 2024 Nepal-China agreement and represents the largest agriculture-related FDI in Nepal’s history.
Lower Solu Hydropower Project connects 82 MW to national grid
The 82-megawatt Lower Solu Hydropower Project in Solukhumbu has started supplying electricity to Nepal’s national grid through the 132 kV double-circuit Solu Corridor transmission line. Developed by Solu Hydropower Ltd with Rs 16 billion in funding—mainly from European financial institutions like FMO—the project began test operations on Saun 4. Despite delays due to landslides and climate challenges, it was completed two months ahead of its planned September 2025 deadline. The project created local employment opportunities and is expected to enhance energy security and bolster economic and infrastructure development in the region.
Paddy plantation in Madhesh at just 46.83% due to weak monsoon, raising fears of crisis
As the first week of Saun ends, only 46.83% of the paddy crop has been planted in Madhesh Province, primarily due to inadequate monsoon rainfall. Much of the farmland remains uncultivated, with insufficient water even to sprout seeds. Overextraction in the Chure region has depleted groundwater, worsening both irrigation and drinking water shortages. Experts warn that if rainfall doesn’t improve by the fourth week of Saun, rice output could fall by 25%, posing a serious risk to food security and the economy. Last year, the province produced over Rs 60 billion worth of rice. A significant drop this year could severely impact national GDP and drive up food prices.
Nepal Rastra Bank to revise loan base rate formula
Nepal Rastra Bank (NRB) is planning to update its base rate calculation system—first implemented in 2012—to better reflect current economic conditions. Rather than discarding the system, the central bank aims to include variables like funding costs, risk premiums, global interest benchmarks, and marginal lending costs. The existing formula, based on reserve requirements, cost of funds, and fixed asset return, has been criticized for being opaque and uncompetitive. The revised system is expected to roll out within this fiscal year. Current base rates among commercial banks range from 4.89% to over 7%, with NIC Asia Bank at the upper end.
Patan Hospital to be expanded into 1,200-bed super-specialty facility
Patan Hospital in Lalitpur-5, operated under the Patan Academy of Health Sciences, will undergo a major expansion, doubling its capacity from 600 to 1,200 beds and transforming into a state-of-the-art super-specialty hospital. A new 10-story building with two basements will span over 72,920 square meters and rise 35 meters in height. The Rs 10.73 billion upgrade, set for completion in three years, will include advanced ICUs, maternity and neonatal units, mental health services, dialysis, and cancer care facilities. It will also enhance training programs for MBBS, BDS, and nursing students and introduce accessible infrastructure for disabled and child patients.
Widespread illegal cashback forces regulator to tighten oversight of life insurers
Following an on-site inspection revealing rampant illegal “cashback” practices among non-life insurers, Nepal’s Insurance Board is preparing to tighten scrutiny on life insurance firms. The probe into 14 non-life insurance companies uncovered unauthorized commission kickbacks routed through fake agents or directly to clients. The regulator suspects similar violations in the life insurance sector and plans targeted inspections focusing on dummy agents and questionable expense claims. Officials warned these practices threaten the sector’s credibility and confirmed that monitoring and enforcement efforts will be intensified going forward.
Banks begin bonus payouts as fiscal year wraps up
As Nepal’s fiscal year ends, private banks have started disbursing bonuses to employees. As per the Bonus Act 2030, private banks must allocate 10% of annual net profits toward employee bonuses. Many banks are issuing advance bonuses equivalent to one to three months’ basic pay, with final amounts to be adjusted post-audit and annual general meetings. State-owned banks follow different guidelines, capping bonuses at 5% of profits or three months’ pay. Nabil Bank, Global IME, Sanima, Prabhu, and NMB are among those that have already credited bonuses, while Rastriya Banijya Bank and ADB will do so after audits.
New NRB cap on loan premiums strains bank finances
Nepal Rastra Bank’s recent decision to cap loan premiums at 2% for loans up to Rs 30 million has added financial strain on banks. Lenders argue the cap limits their ability to recover the high costs of capital raised through debentures and foreign borrowing. For instance, Siddhartha Bank issued debentures at 7.25%, while Nabil and Nepal SBI did so at 7%, but these cannot be factored into lending rates. Additionally, the central bank restricts banks from including shareholder returns in base rate calculations. The Bankers’ Association has called for a review of the base rate and spread formula to reflect real-world capital costs.
WorldLink to receive $14 million IFC loan to expand fiber network
The International Finance Corporation (IFC) is set to provide a $14 million (Rs 1.93 billion) loan to WorldLink Communications, Nepal’s largest internet service provider, to help expand its fiber optic infrastructure and data centers. Legal support was provided by Talwar Thakore & Associates (India) and Pioneer Law Associates (Nepal). Additionally, IFC will offer a partial loan guarantee of $12 million (Rs 1.65 billion) via Standard Chartered Bank, bringing the total financing to Rs 3.58 billion. This initiative aims to improve broadband access across Nepal, helping to close the digital gap. It follows an earlier $29 million financing agreement signed in July 2025.
NEA pole plants plagued by misuse and technical failings
A Nepal Electricity Authority (NEA) internal audit has revealed serious mismanagement and quality issues at its pre-stressed concrete (PSC) pole manufacturing plants in Tanahun, Bara, Kailali, and Morang. Over Rs 1 billion invested in the facilities is now at risk due to inadequate testing, fake diesel expenses, unauthorized contractor access, and administrative pressure to pass faulty products. Despite the lower cost of concrete poles, more expensive steel poles are still being used in regions like the Tarai. The report calls for urgent reforms, greater oversight, and the inclusion of private sector competition to resolve systemic weaknesses.
NEPSE extends rally for five days, sets new records in turnover and market value
The Nepal Stock Exchange (NEPSE) posted gains for the fifth consecutive trading day this week, climbing 112.64 points to close at 2,982.64, up from last week’s 2,870. The exchange saw its highest turnover in nearly a year on Sunday, reaching NPR 21.46 billion. Strong investor activity in microfinance, manufacturing, and hydropower stocks fueled the surge. Total market capitalization hit a new record of NPR 4.977 trillion. Sectoral indices also climbed, with the “Others” index reaching 2,727 and the Hydropower index touching an all-time high of 3,941. SP Chaulagain of the Nepal Investors’ Association described the growth as organic and indicative of increasing investor trust.
High Tension Switchgears sees surge in growth with energy sector boom
As investment in Nepal’s power infrastructure rises, domestic companies like High Tension Switchgears Pvt. Ltd. are seeing rapid business growth. The company, which supplies high-voltage electrical systems and constructs transmission lines, has become increasingly active in key national projects. With demand for reliable grid solutions climbing, High Tension is emerging as a prominent local player in the sector. Industry experts say such firms are playing a vital role in Nepal’s drive for energy self-sufficiency, reducing reliance on foreign contractors for complex high-voltage projects.
King’s College president urges national strategy to unify Nepal’s startup landscape
Narottam Aryal, President of King’s College, has called for a unified national strategy and a central coordinating body to guide Nepal’s entrepreneurial growth. Speaking at the Nepal Entrepreneurship Forum on July 26 in Kathmandu, Aryal reflected on the decade since King’s launched the country’s first degree in entrepreneurship. He noted a sharp rise in startups, international engagement, and community participation. While recent policies are encouraging, he warned that fragmented government and donor efforts could stall progress. Aryal stressed the need for locally grounded, inclusive models that ensure equitable access to capital, mentorship, and networks across all regions.
Kathmandu to fine public smokers, illegal parkers under new municipal law
The Kathmandu Metropolitan City has enacted a new law that fines individuals Rs 500 for smoking in public areas. The policy, part of the newly passed fiscal bill for 2082/83, was announced by City Police Chief Raju Nath Pandey. It follows repeated complaints received through the city’s hotline. Awareness campaigns are planned for the month of Shrawan, with enforcement beginning in Bhadra. The law also imposes parking fines: Rs 1,000 for two- and three-wheelers, Rs 2,500 for small four-wheel vehicles, Rs 3,500 for medium vehicles, and Rs 5,000 for large ones parked outside designated zones.
Coffee farming in Koshi province grows rapidly, now accounts for 20% of national output
Commercial coffee cultivation in Koshi Province has expanded to over 2,000 hectares across 12 districts, involving more than 5,000 farmers. Ilam leads production with 50 metric tons harvested from 900 hectares. The province now contributes around 20% of Nepal’s total coffee output, producing 90–100 metric tons valued at approximately Rs 200 million, with more than half destined for export. The National Tea and Coffee Development Board has allocated Rs 28.35 million this year to support expansion. However, limitations in branding, processing, and market access continue to prevent farmers from reaching global buyers directly, despite growing demand.
Borewells fail Saptari farmers as drought worsens, paddy planting stalls
Prolonged drought conditions in Saptari have rendered many borewells ineffective, leaving farmers without sufficient irrigation. While boring was once limited to select areas, it has now become widespread—but falling groundwater levels have left many farmers, such as Rita Devi Yadav and Punita Yadav, unable to irrigate fields despite borrowing Rs 100,000 each for bore installations. By mid-Asar, only 35% of the district’s paddy fields had been planted, compared to 95% in prior years. Officials and experts cite poor rainfall, dry rivers, and declining aquifers as major challenges, warning of severe food insecurity if conditions don’t improve soon.
Myagdi develops trekking infrastructure with Rs 12 million investment
The Tourism and Industry Office in Myagdi has implemented 10 tourism projects during fiscal year 2081/82 BS, constructing over 4.3 kilometers of trekking trails using a Rs 12 million budget—of which Rs 0.96 million has been used so far. Projects were executed through users’ committees and included walkways, rest stops, shelters, and drainage. Office head Amrit Kandel cited geographical challenges and delays, with payments tied to technical evaluations. Notable upgrades include viewing shelters and safety railings in Khopra, resting areas at Nagidevi Temple, and improved trails in Bim Tallogaun and Barahapakhok’s Peace Park, benefiting both tourists and locals.
Lumpy skin disease infects over 1,500 cattle in Sunsari; 53 deaths reported
An outbreak of Lumpy Skin Disease (LSD) is rapidly affecting livestock across Sunsari district, including areas such as Inaruwa, Dharan, Itahari, Duhabi, Barahakshetra, Ramdhuni, and Gadhi. According to Dr. Manoj Mehta, Chief of the Veterinary Hospital and Livestock Service Centre, 1,516 cattle have been infected so far. Duhabi has the highest infection count at 276, while Dharan has reported only 15 cases. The disease has led to 53 cattle deaths, with Barahakshetra Municipality recording 13 fatalities. In response, over 64,000 cattle have been vaccinated in a district-wide prevention drive aimed at containing the spread.
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