KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s economy is currently experiencing a mix of short-term stimulus and structural vulnerability amid domestic elections and global geopolitical tensions. While election spending and liquidity management by Nepal Rastra Bank have temporarily boosted cash circulation, private sector lending remains weak and deeper issues such as a persistent trade deficit and heavy reliance on remittances continue to threaten long-term stability.
At the same time, external shocks—including rising global oil prices, Middle East conflict disrupting flights and tourism, and slowing global growth—are increasing inflationary risks and weakening key sectors like tourism. Although infrastructure projects such as the Asian Highway show progress and agriculture is gradually mechanizing, Nepal’s economic outlook remains fragile due to limited export diversification, external dependence, and regional geopolitical uncertainties.
NRB to repay Rs 1 billion liquidity auction today
Nepal Rastra Bank will settle the principal and interest of a Rs 1 billion deposit collection auction today (Sunday). The central bank had absorbed excess liquidity from banks through a competitive bidding process on Tuesday for a six-day period. The move coincided with the Ministry of Finance releasing Rs 19.62 billion for election administration and security expenses. Although the election spending has injected liquidity into the system, NRB analysts remain cautious as global crude oil prices increased by 6 percent this week, which could raise inflation and transportation costs in Nepal.
Election spending disrupts but briefly stimulates economic activity
The ongoing House of Representatives election has affected economic momentum nationwide. Data from Nepal Rastra Bank shows private sector lending remains sluggish despite high liquidity in banks. Although Rs 19.62 billion spent on election operations has temporarily boosted cash circulation, structural challenges such as the Rs 9.55 billion trade deficit remain unresolved. Tourism has also suffered due to simultaneous flight disruptions in the Middle East, with hotel cancellations reaching 70 percent. Rising global oil prices during the election period are also expected to increase inflationary pressure in Nepal.
Remittance reliance poses risk to Nepal’s economic stability
Nepal Rastra Bank (NRB) has cautioned that Nepal’s economy remains vulnerable despite a currently strong external sector, largely due to heavy dependence on remittance inflows. In its first semi-annual Macroeconomic Report 2026 released on Saturday, the central bank said the balance of payments is in surplus at Rs 5 billion and foreign exchange reserves stand at Rs 32.42 billion. However, the report highlights persistent structural weaknesses, including a trade deficit of Rs 9.55 billion. To maintain long-term economic resilience, NRB recommends expanding export sectors beyond limited products such as vegetable oils and improving the efficiency of capital spending.
Asian Highway project in Nepal reaches 35 percent progress
The Nepal section of the Asian Highway connecting Kakarbhitta and Laukahi has achieved around 35 percent completion within two years of construction. The project, financed by a USD 300 million loan from the Asian Development Bank, began on February 2, 2024 and aims to link Bangkok and Karachi through Nepal. Officials said 21 of the planned 48 bridges and 92 of the 140 box culverts are currently under construction across both eastern and western sections. The 95-kilometer highway is expected to be completed within three years, improving regional trade and connectivity.
Middle East conflict threatens Nepal’s spring tourism season
Nepal’s tourism industry is facing uncertainty at the start of the peak spring season as Middle East tensions disrupt international flights. Hotel occupancy in Thamel has fallen from around 90 percent to below 50 percent, while online booking cancellations have exceeded 70 percent. More than 75 flights using Gulf transit routes have been affected. Some travelers are postponing trips, while others are rerouting travel plans. The Nepal Tourism Board warns that visitor arrivals in 2026 could decline by 10 to 15 percent, potentially impacting employment and tourism revenue.
Qatar Airways aircraft stuck in Kathmandu amid Middle East tensions
Two Qatar Airways Boeing 787-9 Dreamliners have remained parked at Tribhuvan International Airport for a week due to restrictions on Middle East airspace. The aircraft arrived last Saturday but have been unable to depart after Qatar, the UAE, Kuwait and Iran limited flights following joint military strikes by the United States and Israel. Airport spokesperson Santosh Kumar Basnet said more than two dozen international flights are being cancelled each day. Although Qatar Airways has begun limited relief flights to Europe, Nepal has not yet been included in the priority routes, leaving thousands of travelers stranded along with the aircraft.
Jhapa farmers start early rice planting with mechanized support
Farmers in Jhapa have begun planting Chaite rice earlier in the season, increasingly relying on mechanical rice transplanters to reduce labor shortages and costs. The Agriculture Knowledge Center reported that 10 machines are currently operating across the district through cooperatives. While about 20,000 hectares were cultivated last year, officials expect slightly lower acreage this year as some farmers switch to cash crops and maize. Farmers including Khyam Acharya say low market prices—around Rs 700 to Rs 800 per 40 kilograms—are not enough to offset rising production costs.
Eurozone economic growth revised down to 1.4 percent in 2025
The eurozone economy grew by 1.4 percent in 2025, slightly lower than the earlier estimate of 1.5 percent, according to revised figures from Eurostat. Growth during the final quarter slowed to 0.2 percent from a previous estimate of 0.3 percent. Across the 27-member European Union, annual growth was revised down to 1.5 percent from 1.6 percent. Ireland recorded the steepest contraction, with its economy shrinking by 3.8 percent in the fourth quarter—much worse than the earlier projection of a 0.6 percent decline—illustrating uneven economic performance across the region.
India continues Russian oil imports despite global pressure
India announced that it will maintain imports of Russian crude oil despite international pressure to limit such purchases. As the Middle East conflict pushes global oil prices up by about 30 percent this week, India has begun using part of its strategic reserve of 250 million barrels to stabilize domestic supply. Although the United States has temporarily delayed sanctions related to Russian oil to avoid market disruption, New Delhi insists its energy decisions are guided solely by national interest. India also raised LPG cylinder prices by 7 percent on Saturday.
Pakistan raises fuel prices by 20 percent amid Gulf crisis
Pakistan sharply increased fuel prices on Saturday following rising global oil costs triggered by the Gulf conflict. Petrol prices jumped by PAK 55 to PAK 335.86 per liter, while diesel rose to PAK 321.17. The government cited escalating international crude prices after military strikes in Iran as the main cause. Panic buying has resulted in long lines at fuel stations. Authorities are considering work-from-home arrangements and remote learning programs to reduce fuel consumption nationwide.
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