KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s economy presents a mixed picture marked by cautious optimism and persistent structural weaknesses. Financial markets remain volatile amid election uncertainty, with stock prices largely flat despite a sharp rise in turnover, reflecting speculative activity rather than strong investor confidence. While banks and finance companies have posted profit growth and the insurance sector continues to expand, rising non-performing loans and excess liquidity highlight weak credit demand and subdued private investment.
Public finance performance is uneven, as capital expenditure has declined sharply even though overall spending and revenue collection in some regions have improved. The government’s long-term financial sector reform roadmap signals intent to modernize and deepen markets, yet progress on large infrastructure projects, including hydropower, remains slow due to legal and coordination hurdles.
At the grassroots level, increased election-related spending, improved connectivity, and sectoral gains in agriculture and trade offer short-term relief, but rising household costs, labour shortages, and climate-related disruptions underscore the need for stronger policy execution to translate growth potential into sustainable economic momentum.
NEPSE marginally amid election uncertainty as turnover jumps 84%
The Nepal Stock Exchange (NEPSE) slipped by 0.56 points, or 0.02 percent, over the past week to close at 2,714.05, as investors remained cautious ahead of elections and digested second-quarter financial results. The index moved within a range of 2,702.56 to 2,788.09 points. Hydropower stocks outperformed, gaining 2.93 percent, while the ‘others’ category fell by 1.75 percent. Ankhukhola Hydropower led turnover with transactions worth Rs 2.74 billion, and Trishuli Jal Vidhyut recorded a sharp 28.73 percent rise in market value. Total turnover surged by 83.92 percent to Rs 70.36 billion, although overall market capitalization edged down by more than Rs 1 billion to Rs 4.556 trillion.
Capital spending falls 22 percent in second quarter of fiscal year
Capital expenditure declined by 22 percent in the second quarter of the current fiscal year, according to the Ministry of Finance. Government capital spending fell to Rs 47.54 billion from Rs 58.18 billion a year earlier. In contrast, recurrent and financial expenditures increased, pushing total spending higher. By mid-year, overall expenditure had reached 46.06 percent of the annual budget. Recurrent spending stood at 40.82 percent, while financial expenditure surged to nearly full utilization at 99.93 percent. Total second-quarter spending amounted to Rs 904.64 billion.
Nepal launches five-year roadmap to modernize financial sector
The government has unveiled a five-year financial sector development strategy aimed at accelerating digitalization and strengthening financial infrastructure. Key initiatives include the introduction of neo-banks, open banking, artificial intelligence applications, and preparations for a central bank digital currency. The plan also targets capital market reforms through new instruments such as exchange-traded funds, derivatives, peer-to-peer lending, and crowdfunding platforms. Insurance coverage is projected to reach 60 percent, supported by micro-insurance and green financing. Cooperative oversight will be tightened, while FinCERT will address cyber risks. By 2086/87 BS, the strategy aims to raise the sector’s contribution to GDP to 7.5 percent, triple digital transactions, and expand agricultural lending to 15 percent.
Insurance premiums exceed Rs 1.2 trillion in first half of fiscal year
Nepal’s insurance sector collected more than Rs 1.2 trillion in premiums during the first six months of the fiscal year, with life insurance accounting for nearly 80 percent of the total. Life insurers generated Rs 964.64 billion, while non-life insurers collected Rs 243.02 billion. Bagmati Province led both segments, followed by Lumbini and Koshi. Karnali and Sudur Paschim recorded the lowest contributions. The industry currently includes 14 life insurers, three micro-life insurers, 14 non-life insurers, and four micro non-life insurers, indicating steady sector expansion.
Commercial banks post solid second-quarter profits, led by Nabil
Nepal’s commercial banks collectively earned Rs 30.59 billion in net profit by the end of the second quarter, marking an 11.5 percent increase from last year. Out of 20 banks, 11 recorded profit growth, while nine saw declines. Nabil Bank topped the list with Rs 4.76 billion in net profit, followed by Global IME Bank and Kumari Bank. Other notable performers included Everest Bank, Prime Bank, and Rastriya Banijya Bank. Laxmi Sunrise Bank reported a loss of Rs 270 million. Variations in performance reflected differences in loan management and cost control.
Excess liquidity continues to burden banking system amid weak lending
Nepal’s banking sector is facing mounting excess liquidity, with around Rs 900 billion remaining unused despite historically low interest rates. Weak investor confidence, political instability, and policy uncertainty have dampened credit demand, even as remittance inflows continue to inflate deposits. Banks are struggling with rising interest expenses, squeezing profitability. Although Nepal Rastra Bank has rolled out concessional lending and refinancing measures, loan growth remains sluggish. Economists warn that prolonged excess liquidity could reduce savings returns, fuel imports, and disrupt macroeconomic stability unless funds are directed toward productive sectors.
328mw semi-reservoir hydropower project planned in Dolpa
A 328-megawatt semi-reservoir hydropower project is planned for Dolpa, tapping Nepal’s high-altitude energy potential. The Bharbung–Tatu Khola project will be developed in Chharka Tangsong Rural Municipality. Feasibility and environmental impact studies, conducted with government funding over several years, are complete and awaiting final approval. Once cleared, authorities will decide whether to proceed through public investment or private sector participation. The project is expected to generate additional power from the Tatu Khola and affect two rural municipalities.
Vehicle imports through Birgunj surge, lifting customs revenue
Birgunj Customs recorded vehicle and spare parts imports worth Rs 18.15 billion in the first half of the fiscal year, nearly Rs 6 billion more than last year. Customs revenue from these imports reached Rs 13.98 billion, up from Rs 10.21 billion previously. Imports included passenger vehicles, motorcycles, trucks, tractors, and trailers, along with a notable rise in electric vehicles worth Rs 1.36 billion, reflecting growing demand for EVs.
Non-performing loans rise across commercial banks
Non-performing loans in Nepal’s commercial banks increased in the second quarter of FY 2082/83, with the sector-wide average climbing to 5.08 percent from 4.49 percent a year earlier. Twelve banks reported higher NPLs, while eight recorded declines. Four banks posted NPL ratios between 7 and 8 percent. Everest Bank maintained the lowest ratio, followed by Standard Chartered and Nepal SBI Bank. Himalayan Bank recorded the highest NPL, with Nepal Investment Mega Bank, Prabhu Bank, and NIC Asia Bank also nearing 8 percent.
Locals press for revival of stalled Phukot Karnali hydropower project
Residents of Kalikot have urged authorities to resume construction of the 480-MW Phukot Karnali hydropower project, which has been halted for two years. Despite completed land acquisition and over Rs 450 million paid in compensation, work stopped due to a legal dispute over equity allocation to India’s NHPC. Although the case has been dismissed, officials say construction cannot restart until the full verdict is received and outstanding issues are resolved. The Rs 92 billion project remains stalled amid growing local frustration.
Private school enrollment and household education spending continue to rise
Despite basic education being constitutionally guaranteed, private school enrollment in Nepal continues to grow due to declining public school quality. Census data show 36 percent of students from grades 1–12 now attend private institutions, with pre-primary enrollment exceeding 50 percent. Household spending accounts for 72 percent of total education costs, highlighting the financial burden on families. Rising expenses in education, food, housing, and transport are keeping many households in long-term financial strain.
Study highlights labour shortages and logistics barriers in apparel sector
Nepal’s garment industry is facing serious challenges, including labour shortages, high turnover, rising costs, and weak logistics, according to a joint study by SAWTEE and the Garment Association Nepal. More than three-quarters of firms cited land costs, labour scarcity, and export logistics as major constraints. Despite these hurdles, the sector has strong growth potential, with exports projected to rise by nearly 87 percent if key bottlenecks are addressed ahead of Nepal’s LDC graduation.
Jamunaha border reopens for third-country nationals after six years
The Jamunaha border point in Banke has reopened for third-country nationals, restoring full immigration services after nearly six years. Officials say the move will support tourism, revive local hospitality businesses, and boost economic activity. Tourists entering via India can now access destinations in Banke and Bardiya, including national parks, improving cross-border travel and regional tourism flows.
Electricity reaches remote Makawanpur settlements for the first time
After decades without power, electricity has finally reached Deujar and Gadhansir in eastern Makawanpur. A power line was extended to 79 households with technical support from the Nepal Electricity Authority and infrastructure investment from the rural municipality. Local leaders said the connection would improve education, health services, and livelihoods in the Tamang-majority settlements that have lacked basic services for generations.
Food imports via Birgunj decline slightly in first half
Food imports through Birgunj customs totaled Rs 11.57 billion in the first six months of the fiscal year, marginally lower than last year’s Rs 11.78 billion. Rice imports declined in both volume and value, while maize and other grains recorded moderate inflows. Customs officials said the small decline reflects stable trade conditions at the country’s largest entry point.
Finance companies report strong profit recovery in second quarter
Nepal’s finance companies posted a combined net profit of Rs 32.77 crore in the second quarter, reversing a loss of Rs 73.02 crore recorded a year earlier. Only three companies remain in loss, down from six previously. Manjushree Finance led earnings, followed by Goodwill Finance and Gorkhaj Finance. Profit growth ranged widely, with some firms posting turnarounds exceeding 2,000 percent.
Bhairahawa revenue office exceeds mid-year collection target
The Bhairahawa Inland Revenue Office surpassed its half-year target by collecting Rs 8.17 billion, exceeding projections by 23 percent. Revenue rose by 47 percent compared to last year, driven by taxpayer outreach, compliance campaigns, market monitoring, and arrears recovery. Authorities aim to collect Rs 15.5 billion by the end of the fiscal year.
Construction and tree planting banned along MCC transmission corridor
The government has restricted construction and tree plantation within 23 meters on either side of the MCC-funded 400kV transmission line corridor. The ban covers more than 1,300 hectares across several districts and is intended to facilitate transmission line construction. Affected landowners will receive compensation under existing laws.
Baglung orange production reaches Rs 270 million
Orange production in Baglung district reached approximately Rs 270 million this year, supported by improved orchard management, pest control, and favorable weather. Production rose slightly from last year, with farmers earning at least Rs 65 per kilogram. Orange farming continues to expand as growers shift away from traditional crops in search of better returns.
Election campaigning begins to lift local economic activity
With the March 5 House of Representatives election approaching, local economies across several districts have started to see increased activity. Businesses such as tea shops, hotels, transport services, printers, and fuel suppliers report higher demand linked to campaign activities. Some areas have seen daily transactions rise by up to 10 percent, boosting optimism among traders.
Audit dispute emerges over alleged underpowered EV imports
The Auditor General’s Office has flagged a potential Rs 3.77 billion revenue loss over claims that electric vehicles were imported with understated motor power. However, Nepal lacks technical capacity to independently verify motor specifications, and authorities rely on manufacturer documentation. Without legal or technical evidence, the claim remains contentious and could face court challenges.
Untimely rainfall destroys millions of bricks in Banke
Two days of continuous rainfall have caused heavy losses to brick producers in Banke, damaging millions of raw bricks across around 70 kilns. Industry representatives estimate losses at nearly Rs 100 million, warning that disrupted production could lead to brick shortages and price increases later in the season.
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