KATHMANDU: Economic Digest presents a brief yet comprehensive roundup of major business developments in Nepal, delivered in clear and accessible summaries.
Nepal’s latest economic indicators reflect a mixed but increasingly fragile financial landscape, marked by weak development spending, excess banking liquidity, rising fiscal irregularities, and growing external risks. While the government has spent nearly 60 percent of its annual budget in 10 months, capital expenditure remains critically low, highlighting continued inefficiency in project execution despite generous tax exemptions and infrastructure commitments.
At the same time, the banking system is struggling with surplus liquidity, forcing Nepal Rastra Bank to absorb Rs 45 billion and commercial banks to cut interest rates further, signaling weak private-sector credit demand.
The Auditor General’s report paints a troubling picture of governance, with outstanding financial irregularities surpassing Rs 755 billion, widespread arrears across ministries and local governments, unpaid telecom royalties, and concerns over fiscal transparency and accountability.
Meanwhile, rising fuel prices in India threaten to intensify inflationary pressure, widen Nepal’s trade deficit, and strain foreign exchange reserves, even as gold prices fall and the stock market shows only modest recovery.
Together, these developments suggest that Nepal’s economy is facing mounting structural challenges that require stronger fiscal discipline, improved governance, and more effective investment mobilization to sustain economic stability and growth.
Govt spends nearly 60 percent of annual budget in 10 months
The government has spent Rs 1.173 trillion, or 59.75 percent of the total annual budget, during the first 10 months of the current fiscal year, according to the Office of the Financial Comptroller General. Recurrent expenditure has reached 68.98 percent of the allocated amount, while capital expenditure remains low at just 27.91 percent, indicating slow implementation of development projects. Revenue collection has reached Rs 1.012 trillion, equivalent to around 66 percent of the annual target. Tax revenue alone stands at Rs 988 billion. Foreign grant mobilization has remained weak, with the government receiving only Rs 17.78 billion, or 33.28 percent of the annual target, as of May 14.
NEPSE rises 1.77 points as daily turnover declines to Rs 3.09 billion
The Nepal Stock Exchange (NEPSE) index gained 1.77 points on Friday to close at 2,731.94, ending the week on a positive note after three straight days of decline. Daily turnover fell to Rs 3.09 billion from Rs 3.29 billion recorded on Thursday. A total of 7.93 million shares of 338 companies were traded through 43,673 transactions. Share prices of 127 companies increased, while 120 companies posted losses. Among sectoral indices, commercial banks, finance, hydropower, non-life insurance, and trading sectors recorded gains, whereas development banks, investment, life insurance, and microfinance sectors ended lower. The sensitive index also increased by 0.07 percent to reach 467.55 points.
Gold and silver prices decline in domestic market
Gold and silver prices fell in the domestic market on Friday, according to the Federation of Nepal Gold and Silver Dealers’ Association. The price of gold dropped by Rs 4,000 per tola (11.66 grams), bringing the rate down to Rs 298,500 per tola. On Thursday, gold was traded at around Rs 302,500 per tola. Silver prices also declined sharply. The price of silver fell by Rs 355 per tola to Rs 5,390. A day earlier, silver was traded at Rs 5,745 per tola.
NRB absorbs Rs 45 billion to control excess liquidity in banking system
Nepal Rastra Bank (NRB) on Friday withdrew Rs 45 billion from the banking system through a deposit collection instrument aimed at managing excess liquidity and stabilizing interest rates in the market. The central bank used a 42-day deposit collection tool, open to Class “A”, “B”, and “C” financial institutions. The interest rate was determined through competitive bidding. The principal and interest amount are scheduled to be repaid on June 26. NRB regularly uses such structural open market operations, which can remain effective for up to six months, to prevent large volumes of idle investable funds from creating negative impacts on the economy and financial sector.
Nepal’s outstanding financial irregularities rise to Rs 755.17 billion
Nepal’s total outstanding financial irregularities have increased to Rs 755.17 billion, according to the annual report of the Office of the Auditor General submitted to President Ram Chandra Paudel on Friday. Auditor General Toyam Raya said Rs 88.09 billion in new irregularities were identified during the fiscal year 2024/25 alone. Federal government offices accounted for the largest share, totaling Rs 53.48 billion. The report noted that overall irregularities increased by 2.99 percent compared to the previous year due to weak enforcement mechanisms and poor implementation of audit recommendations. An additional Rs 787.86 billion has also been flagged for further investigation and action involving revenue, foreign aid, loans, and reimbursements.
Fuel price increase in India likely to affect Nepal’s economy
Indian state-owned oil companies on Friday raised petrol and diesel prices by more than 3 percent for the first time since the outbreak of the Middle East conflict in February. In Delhi, petrol prices climbed to IRs 97.77 per liter, while diesel prices reached IRs 90.67 per liter. As Nepal imports all of its petroleum products from India, the latest price hike is expected to increase domestic inflation and transportation costs. The rise in fuel prices has been linked to Iran’s blockade of the Strait of Hormuz, a key shipping route that handles nearly half of India’s crude oil imports. In response, India has expanded imports of Russian crude oil. Indian External Affairs Minister S. Jaishankar criticized unilateral sanctions, saying they disproportionately affect developing countries. Analysts warn that continued energy market instability could further widen Nepal’s trade deficit and put additional pressure on foreign exchange reserves.
Commercial banks reduce interest rates for mid-May to mid-June
Commercial banks in Nepal have lowered interest rates again for the period between May 15 and June 14. According to updated rates published by 20 commercial banks, the average interest rate on individual fixed deposits has fallen to 4.3 percent from 4.4 percent in the previous month. Rastriya Banijya Bank is offering the highest fixed deposit interest rate at 4.75 percent, while Kumari Bank has the lowest rate at 3.96 percent. Twelve banks kept their rates unchanged, Siddhartha Bank made a slight increase, and six banks reduced their rates. Bankers say the decline is mainly due to excess liquidity in the banking sector, where more than Rs 1.1 trillion in investable funds remains unused.
Govt provides Rs 85.23 billion in customs duty exemptions
The government granted customs revenue exemptions worth Rs 85.23 billion during the fiscal year 2024/25, according to the 63rd Annual Report of the Auditor General. The amount is higher than the Rs 79.87 billion in exemptions provided during the previous fiscal year. Major exemptions included Rs 5.71 billion under SAFTA facilities and Rs 6.12 billion for different projects and government agencies. The report criticized the Ministry of Finance for lacking proper records on internal revenue exemptions. It also stated that many contractors are directly benefiting from tax exemptions provided through “Master Lists” without reflecting the savings in project costs. The report warned that such practices are affecting government revenue mobilization and weakening fiscal transparency.
Govt approves tax exemptions for 13 major development projects
The government has approved major tax exemptions for 13 development projects aimed at supporting infrastructure expansion. According to a notice published in the Nepal Gazette by the Ministry of Finance, imported goods and materials for these projects will receive significant tax relief. Most projects will be charged only a 1 percent customs duty, while other taxes, charges, and fees will be fully waived. Some projects have received complete tax exemptions. The total estimated value of goods covered under these exemptions is around Rs 8.25 billion. The government said the measure is intended to speed up infrastructure development by reducing the cost of importing specialized machinery and raw materials.
Finance Ministry records highest arrears among federal ministries
The Ministry of Finance has recorded the highest amount of arrears among federal government entities, according to the 63rd Annual Report of the Auditor General. Out of the total federal government arrears of Rs 53.48 billion, the Ministry of Finance and its subordinate agencies account for nearly 70 percent, amounting to Rs 37.63 billion. The Ministry of Physical Infrastructure and Transport ranked second with arrears totaling Rs 7.10 billion, or 13.28 percent of the total. Other ministries with significant arrears include the Ministry of Land Management, Cooperatives and Poverty Alleviation with Rs 1.53 billion, the Ministry of Forests and Environment with Rs 1.34 billion, and the Ministry of Communications and Information Technology with Rs 1.16 billion. The report also identified arrears ranging from Rs 520 million to Rs 800 million in ministries such as Urban Development, Foreign Affairs, Energy, Home Affairs, and Health, indicating widespread weaknesses in financial management across the federal government.
Nepal Airlines’ debt climbs to Rs 55 billion
Nepal Airlines Corporation’s (NAC) total debt has increased from the original principal amount of Rs 36 billion to around Rs 55 billion, according to the 63rd Annual Report of the Auditor General. The national flag carrier borrowed the funds during fiscal years 2013/14 and 2017/18 under government guarantees to purchase aircraft. The liabilities include Rs 31.33 billion owed to the Employees’ Provident Fund (EPF) and Rs 21.12 billion to the Citizens Investment Trust (CIT). The report stated that delays in repayment of principal and interest have significantly increased the corporation’s financial burden, raising concerns about its long-term operational sustainability.
Telecom companies fail to pay Rs 353.6 million in royalties
A total of 45 telecommunications service providers have failed to pay government royalties amounting to Rs 353.6 million, according to the Auditor General’s report. Based on financial records for the fiscal year 2023/24, the companies generated a combined income of Rs 8.84 billion. Under Rule 26 of the Telecommunications Regulation, 1997, licensed telecom operators are required to pay 4 percent of their annual gross income as royalties to the government. The report stated that the outstanding amount remains uncollected and urged the Ministry of Communications and Information Technology to determine and recover the dues along with applicable penalties. The report also highlighted weaknesses in oversight and revenue collection within the telecommunications sector.
Auditor General identifies Rs 19.05 billion in local-level arrears
The Office of the Auditor General has reported total arrears of Rs 19.05 billion at the local government level. The audit covered 721 local units with a combined financial transaction volume of Rs 1.109 trillion. The arrears represent 1.72 percent of the audited amount. According to the report, Rs 2.01 billion must be recovered, Rs 15.18 billion requires regularization, and Rs 1.84 billion remains categorized as unsettled advances. While 681 local units maintained arrears below 5 percent, one local unit recorded arrears exceeding 15 percent. The report also revealed that 15 local units spent Rs 77.09 million on software systems that were never brought into use. In addition, one local unit failed to undergo an audit entirely, raising concerns over accountability and financial discipline.
Govt approves Rs 968 million for five bridges on Kaligandaki Corridor
The Ministry of Finance has approved a source agreement worth Rs 968 million for the construction of five permanent bridges under the Kaligandaki Corridor (Beni–Jomsom–Korala) Road Project. The bridges will be built along the Maldhunga–Beni and Beni–Jomsom road sections at locations including the Kaligandaki River connecting Parbat and Myagdi, Rupse Waterfall, Sunkhola, Ghatte Khola, and Thapa Khola. Project officials said the bidding process is expected to begin within a month. So far, 15 permanent bridges have already been completed along the strategic north-south corridor. Construction of the bridge over Ghami Khola in Upper Mustang is also nearing completion and is expected to finish within the current fiscal year.
Rising material prices push construction sector into crisis
The Lumbini Construction Entrepreneurs Association has warned that soaring fuel and construction material prices are pushing the construction sector into a serious crisis. According to the association, sharp increases in the prices of diesel, bitumen, iron, cement, transportation, and labor have made it impossible to complete projects at previously agreed contract rates. Construction companies are facing mounting financial pressure, threatening both ongoing development projects and the livelihoods of workers dependent on the sector. The association has urged the government to introduce policy support measures, including adjustments to bank guarantees, insurance, deposits, and advance payment arrangements.
Traffic fines generate nearly Rs 2 million in a single day
Kathmandu Valley Traffic Police took action against 2,144 drivers for violating traffic rules in the past 24 hours, collecting Rs 1.95 million in fines. According to traffic police, 140 drivers were penalized for drunk driving, 151 for unauthorized ride-sharing, 149 for traffic signal violations, and 186 for overspeeding. Similarly, 102 drivers were fined for violating lane discipline, 142 for honking in restricted zones, 95 for roadside and pavement parking, and 118 for driving on one-way roads. An additional 1,110 cases involved other traffic-related violations.
Nepalgunj Distribution Centre recovers Rs 50 million in unpaid electricity dues
The Nepal Electricity Authority’s Nepalgunj Distribution Centre has recovered Rs 50 million in unpaid electricity bills through a large-scale disconnection campaign. Over the past five months, electricity supply to around 5,500 customers was disconnected due to long-standing unpaid dues. Following the action, 4,500 customers cleared their outstanding payments and had their electricity services restored. Total arrears had reached Rs 63 million. Under existing legal provisions, electricity bills must be paid within 60 days, after which penalties are automatically imposed. The distribution center has also intensified inspections during public holidays to curb electricity theft, illegal hooking, and meter tampering, helping improve supply reliability and reduce leakage across Banke district.
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