KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s latest economic indicators present a mixed but fragile picture marked by market caution, fiscal strain, and uneven sectoral momentum. The sharp fall in the NEPSE index alongside high turnover suggests active trading driven more by profit-booking and risk aversion than fresh confidence, a mood reinforced by declining gold and silver prices. On the fiscal front, a significant mid-year revenue shortfall and weak capital expenditure highlight persistent structural inefficiencies, even as Nepal Rastra Bank’s liquidity absorption move signals efforts to stabilize the financial system.
While commercial banks show early signs of improving asset quality, elevated non-performing loans in several institutions underscore lingering credit risks. Trade data reveal growing dependence on imports—particularly pulses and electric vehicles—despite encouraging export growth in niche sectors such as medicinal herbs. Large infrastructure projects reflect long-term development intent, but repeated delays contrast with isolated progress such as bridge completion on the Narayanghat–Butwal corridor.
Against this backdrop, India’s continued budgetary support offers external stability, yet domestic policy coordination challenges—evident in stalled cooperative relief—suggest that Nepal’s economic recovery remains constrained by governance gaps as much as by macroeconomic pressures.
NEPSE index falls 19.85 points as turnover reaches Rs 9.1 billion
The Nepal Stock Exchange (NEPSE) recorded a double-digit decline on the first trading day (Sunday) of the week. The benchmark index dropped by 19.85 points to close at 2,694.20. A total of 22.06 million shares of 329 listed companies were traded through 110,728 transactions, generating a turnover of Rs 9.109 billion. Among sectoral indices, only the trading group posted gains, rising by 0.55 percent. All other sectors ended in the red. Banking declined by 0.42 percent, development banks by 0.75 percent, finance by 0.44 percent, hotels and tourism by 1.75 percent, hydropower by 1.36 percent, and investment by 0.96 percent. Life insurance slipped by 0.52 percent, manufacturing and processing by 0.76 percent, microfinance by 0.57 percent, mutual funds by 0.50 percent, non-life insurance by 0.63 percent, and the others group by 0.92 percent.
Gold and silver prices decline sharply
Gold and silver prices fell in the domestic market today, according to the Federation of Gold and Silver Dealers’ Association. The price of gold dropped by Rs 18,800 per tola, settling at Rs 300,000, down from Rs 318,800 on Friday. Silver prices also declined sharply, falling by Rs 1,565 per tola to Rs 5,500. On the international market, gold is trading at USD 4,865 per ounce, while silver stands at USD 85 per ounce.
Finance Ministry reports Rs 129 billion revenue shortfall
During the first half of fiscal year 2025/26, the government spent 46 percent of its total budget of Rs 1.964 trillion. Recurrent expenditure stood at Rs 482.11 billion, while capital spending remained low at just 11.66 percent, amounting to Rs 47.54 billion. Revenue collection reached Rs 581.41 billion, falling short of the mid-year target by Rs 129.8 billion. Despite the gap, officials noted a modest 2 percent increase compared to the same period last year. The ministry has also allocated Rs 6.736 billion for the March 5 elections.
NRB to mop up Rs 30 billion from banks for 52 days
Nepal Rastra Bank has announced plans to withdraw Rs 30 billion from the banking system for a period of 52 days to address excess liquidity. The amount will be collected through a deposit auction beginning today. Banks and financial institutions must submit online bids by 2 pm on Wednesday. Interest rates will be determined through competitive bidding, and both principal and interest will be repaid on March 25. Institutions are allowed to place multiple bids at varying rates, with allocations prioritized at the lowest offered rates until the full amount is absorbed.
India allocates INR 8 billion grant for Nepal in 2026 budget
India has earmarked an annual grant of INR 8 billion (approximately Rs 12.91 billion) for Nepal in its 2026 federal budget, presented by Finance Minister Nirmala Sitharaman. The allocation mirrors the initial amount provided in the previous fiscal year. The budget also underscores the Varanasi–Siliguri rail corridor, expected to lower trade costs for Nepal. In addition, India has waived import duties on 17 cancer drugs and seven medicines for rare diseases, offering relief to Nepali patients seeking treatment in India. Bhutan remains the largest beneficiary, receiving INR 22.88 billion.
Dispute stalls Rs 2 billion cooperative relief fund
The Ministry of Land Management, Cooperatives and Poverty Alleviation is facing a deadlock with the Ministry of Finance over funding to compensate cooperative victims. While the ministry sought Rs 2 billion to support small depositors, the Finance Ministry instructed it to operate within the existing Rs 250 million allocation. At present, 23 cooperatives have been labeled problematic, affecting 74,307 depositors who claim losses totaling Rs 44.89 billion. By mid-July 2025, only Rs 2.93 billion had been repaid, leaving victims of major cooperatives such as Oriental and Kantipur awaiting recovery of over Rs 40.77 billion.
Commercial banks show early signs of asset quality recovery
Second-quarter financial statements of 20 commercial banks for fiscal year 2025/26 indicate gradual improvement in asset quality, with 10 banks reducing their non-performing loan (NPL) ratios. Nabil Bank lowered its NPL to 4.25 percent, while Nepal SBI Bank posted a sharp decline to 2.64 percent. Despite these improvements, the industry-wide NPL average rose to 4.85 percent due to significant increases at some banks. Himalayan Bank recorded the highest NPL ratio at 7.96 percent, followed by Prabhu Bank at 7.94 percent and Nepal Investment Bank at 7.90 percent. Analysts say the broader trend still points toward recovery.
Korala border customs collects Rs 4.54 billion despite snowfall
Operations at the Mustang Customs Office near the Korala border have been disrupted since Tuesday due to heavy snowfall at elevations above 4,650 meters. Dozens of containers, including electric vehicles imported from China and handicrafts meant for export, remain stranded. Despite the disruption, the customs office reported revenue collection of Rs 4.54 billion as of late January. Since commercial operations began in September 2024, imports through the border include 3,329 electric vehicles worth Rs 11 billion, while exports have totaled Rs 200 million. Clearing the snow-covered 14-kilometer road is expected to take at least a week.
Pulse imports through Birgunj climb to Rs 7.64 billion
Imports of pulses through the Birgunj customs point rose sharply in the first six months of the current fiscal year, reaching Rs 7.64 billion. This represents a 31 percent increase compared to Rs 5.83 billion recorded during the same period last year. Lentils made up the largest share of imports at Rs 3.82 billion, followed by dry beans worth Rs 1.17 billion and chickpeas valued at Rs 1.14 billion. Imports of dry peas totaled Rs 270 million.
Nepalgunj herb exports rise 71 percent to Rs 331 million
Herb exports via the Nepalgunj border surged by 71 percent in the first half of the current fiscal year. The Nepalgunj Customs Office recorded exports worth Rs 331.3 million, up from Rs 193.4 million in the same period last year. Key export items include timur, cinnamon, and amla sourced from Lumbini, Sudurpaschim, and Karnali provinces. Despite this growth, the region continues to face a large trade deficit, with imports of Rs 37.62 billion compared to total exports of Rs 1.36 billion. Revenue collection has reached Rs 9.35 billion.
Construction begins on Rs 25 billion Lower Seti hydropower project
Tanahu Hydropower Limited has commenced preliminary construction work for the 126 MW Lower Seti Hydropower Project, including access roads and office infrastructure. The project, estimated to cost Rs 25 billion, will utilize water released from the existing 140 MW Tanahu hydropower facility. Plans include a 32-meter-high dam near Saranghat and a 6.8-kilometer tunnel leading to a powerhouse in Devghat. The project is expected to generate 520 million units of electricity annually. Land acquisition is underway, and the Asian Development Bank has provided a USD 3.5 million grant for detailed design and engineering.
Nagdhunga–Malekhu road upgrade delayed by three years
The expansion of the 38.86-kilometer Nagdhunga–Malekhu section of the Prithvi Highway has achieved only 37.5 percent completion, despite the original contract period ending on December 30, 2025. Authorities have granted a 183-day extension following delays caused by design flaws and mapping errors. The Rs 4.805 billion project, funded by the World Bank and implemented by Sharma–ZICG JV, has also faced obstacles related to tree cutting, utility relocation, and heavy traffic. While nine kilometers have been blacktopped, substantial work remains on bridges and landslide mitigation.
All 34 bridges completed on Narayanghat–Butwal road section
Construction of all 34 bridges under the eastern segment of the Narayanghat–Butwal road expansion project has been completed. Of these, 33 bridges are already operational, while finishing work is underway on the Arun River bridge. The 114-kilometer project is being implemented by China State Engineering Construction Corporation with financing from the Asian Development Bank, covering 85 percent of the Rs 17 billion cost. Overall physical progress has reached 76 percent, with the deadline extended four times to July 24 due to delays.
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