KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
The collection of developments points to a cautiously improving but structurally strained Nepali economy, where short-term optimism is driven by political clarity, remittance-backed liquidity, and seasonal activity, while deeper vulnerabilities persist. Financial markets have responded positively to clearer election signals, reflected in a strong NEPSE rally, rising bank lending, higher turnover, and growing deposits, yet this momentum is largely cyclical and supported by remittances rather than productive investment.
Externally, Nepal’s widening trade deficit, rising food imports, declining paddy output, and heavy dependence on India and China underscore persistent weaknesses in domestic production and export diversification, despite gains in value-added exports via Birgunj and new trade routes with China. Labor migration remains a critical economic safety valve, now reinforced by formal agreements such as the Saudi labor pact, even as it highlights limited domestic job creation.
On the policy and governance front, tighter banking rules, cooperative reforms, delayed infrastructure projects, off-budget aid spending, and penalties for corporate non-compliance reveal ongoing institutional fragility and execution gaps. At the same time, selective progress, such as hydropower planning, digital innovation, AI adoption, transport regulation reforms, and expanded connectivity in tourism hubs, suggests potential long-term growth pathways, provided political stability translates into coherent reforms, stronger fiscal discipline, and productivity-led growth rather than reliance on seasonal, remittance-fueled demand.
NEPSE rises 2.77% as political clarity lifts investor sentiment
The Nepal Stock Exchange (NEPSE) advanced by 73.18 points, or 2.77 percent, last week as improving political signals and expectations of timely general elections boosted investor confidence. Over four trading days, the benchmark index climbed from 2,641.43 points on Sunday to 2,714.61 points on Thursday, moving within an 87.92-point range. The finance sector posted the strongest gains, rising 7.48 percent, while the trading sector was the only decliner. Market activity increased sharply, with total turnover nearly doubling to Rs 38.25 billion. Market capitalization expanded by Rs 122 billion, generating notable capital gains for investors.
Nepal records trade surplus with 36 countries, deficit with 116
In the past six months, Nepal generated trade surpluses with 36 countries while running deficits with 116. Top surplus partners included Romania, Denmark, Sweden, Nigeria, Iraq, Norway, and Iceland. Conversely, Nepal recorded its largest trade deficits with India (Rs 416.71 billion) and China (Rs 195.36 billion), followed by Argentina, the UAE, Indonesia, Thailand, Malaysia, Australia, Brazil, and Brunei.
Nepal’s trade deficit reaches Rs 797 billion in first half of fiscal year
Nepal’s trade deficit widened by 10.15 percent to Rs 797 billion in the first six months of FY 2025/26, driven by a sharp rise in imports that outpaced export growth. Imports increased by Rs 117 billion to Rs 939 billion, while exports rose by only Rs 43 billion to Rs 142 billion. Major imports included petroleum products, crude soybean oil, iron, gold, and smartphones. Exports were led by processed soybean oil, cardamom, carpets, sunflower oil, and fibre. India accounted for 56.7 percent of total imports, resulting in a Rs 416.7 billion trade deficit with the southern neighbor. Nepal recorded trade deficits with nearly all of the 152 countries it traded with.
Citizen Investment Trust enrollment crosses 800,000, funds near Rs 296 billion
Since its establishment in February 1992, the Citizen Investment Trust (CIT) has enrolled 804,500 participants, with total fund balances reaching Rs 296 billion and investments amounting to Rs 295 billion. CIT currently operates seven schemes, including Employee Provident Savings (373,000 participants), Production and Pension Scheme (37,000), Citizen Pension Scheme (14,000), and insurance programs for civil servants, teachers, the Nepal Army, Police, and Armed Police Force. The Trust promotes savings and economic growth through loan facilities of up to 90 percent of deposits, while monthly contributions begin at Rs 500. Awareness efforts continue through institutions and social media platforms.
Nearly 590,000 Nepalis secure foreign work permits in six months
A total of 590,718 Nepalis left the country for overseas employment over the past six months, according to the Department of Foreign Employment. During Shrawan–Poush of the current fiscal year 2082/83, 141 undocumented workers were brought into the formal system. Of the total, 196,042 workers renewed their permits, including 4,866 through government-to-government (G2G) arrangements with Israel, South Korea, and the UK. Another 64,262 individuals obtained personal work permits, while 325,407 were deployed through licensed manpower agencies. The figures highlight sustained demand for foreign jobs and the growing role of regulated migration channels.
Govt plans 328 MW Bharbung hydropower project in Dolpa
The government has announced plans to develop the 328.10 MW Bharbung reservoir-based hydropower project in Dolpa at an estimated cost of Rs 103.31 billion. Promoted by the Department of Electricity Development, the project will affect Chharka Tangsong wards 4 and 5 and Kaike ward 1. Key infrastructure includes a 169-meter-high dam, a 766.1-meter diversion tunnel, a 16-kilometer headrace tunnel, an underground powerhouse, and a tailrace tunnel. Parts of Chharka Tangsong–5 will be submerged. Using water from the Bharbung River and Tatu Khola, the project is expected to generate 933.2 GWh annually. Environmental management, land acquisition, and CSR costs are estimated at Rs 2.44 billion.
Nepal and Saudi Arabia to sign first-ever labor agreement
Nepal and Saudi Arabia are set to sign their first bilateral labor agreement on Monday, with Labor Minister Rajendra Singh Bhandari leading the Nepali delegation. The Cabinet approved the agreement in mid-September. The pact prioritizes worker rights, safety, and welfare, covering wages, working conditions, and the deployment of skilled and semi-skilled labor. Saudi Arabia has emerged as the top destination for Nepali workers in recent months, with more than 41,000 deployed between mid-October and mid-January. In January alone, 62,559 Nepalis went abroad for employment, mainly to Saudi Arabia, Qatar, the UAE, Malaysia, and Kuwait.
Nepal–China third border trade coordination meeting concludes in Lhasa
The third Nepal–China Border Trade and Cooperation Coordination Meeting was held in Lhasa, Tibet, on January 20–21, 2026. The Nepali delegation was led by Secretary Dr. Ram Prasad Ghimire, while Vice Chairman Chao Peng led the Chinese side. The meeting reviewed past agreements and focused on trade facilitation, customs procedures, infrastructure, and investment cooperation. Agreements included simplifying border passes, accelerating the Tokha–Chhahare tunnel, promoting zero-tariff fertilizer imports, and improving customs clearance through green channels. Both sides also committed to joint infrastructure projects at Kimathanka and Rasuwagadhi, sister-city partnerships, revival of the Kathmandu–Lhasa bus service, and collaboration in traditional medicine. The next meeting will be hosted by Nepal in 2027.
Nepal ranks 76th globally in AI adoption, says Microsoft report
Nepal ranks 76th out of 147 countries in artificial intelligence adoption, according to Microsoft’s Global AI Adoption in 2025 report. While AI usage is slowly expanding, the country lags behind global averages due to weak digital infrastructure, limited technical skills, and fragmented policy frameworks. Around 13 percent of Nepal’s working-age population uses generative AI tools, higher than most South Asian countries except India. The report emphasizes that early investment in infrastructure, skills development, and regulatory clarity is crucial for wider AI adoption.
Nepali AI platform ‘Mirago’ introduces virtual try-on for online shoppers
Nepal-based AI platform Mirago aims to address a common online shopping concern by offering a virtual trial room experience. Users upload their photo along with an image of clothing, and the AI digitally fits the outfit onto their image. Designed for students, professionals, influencers, and general users, the platform simplifies outfit selection for events, parties, and weddings. Available on web, App Store, and Play Store, Mirago offers a Nepali-language interface and emphasizes user privacy while delivering a locally developed digital fashion solution.
Social media algorithms reshape political discourse ahead of elections
The Gen-Z protests of September 2025, triggered partly by government restrictions on social media, underscored the deep integration of digital platforms into daily life in Nepal. Despite shutdowns, users bypassed controls using VPNs, reflecting strong dependence on online spaces. Social media algorithms track user behavior—such as watch time, likes, and shares—to promote viral content. As elections approach, these systems are increasingly shaping political narratives by amplifying sensational and personality-driven content over policy debates. Analysts warn that this trend may deepen polarization, reinforce echo chambers, and weaken informed democratic decision-making.
Rice imports cross Rs 20 billion as domestic output declines
Nepal’s rice imports reached Rs 20.39 billion in the first six months of the current fiscal year, rising by Rs 1.28 billion year-on-year. Basmati rice accounted for Rs 4.27 billion, while raw and semi-processed rice imports totaled Rs 9.87 billion. Despite higher import volumes, revenue collection fell to Rs 144.26 million. Once a rice exporter, Nepal has become increasingly import-dependent following market liberalization in the 1990s. With annual consumption at around 480,000 tonnes, domestic production continues to lag behind demand.
Air Dynasty tops helicopter passenger services in 2025
Among Nepal’s 12 charter helicopter operators, Air Dynasty transported the highest number of passengers in 2025, serving 7,297 passengers across 2,400 flights with four helicopters. Kailash ranked second with 6,325 passengers from 2,296 flights. Heli Everest followed with 6,242 passengers using three helicopters. Overall, Nepal’s helicopter sector carried 54,827 passengers in 2025, marking a 6 percent increase from the previous year. Mustang Helicopter recorded the lowest numbers, serving 672 passengers.
Property transactions rise in Poush, revenue exceeds Rs 5.17 billion
Despite an overall slowdown in the real estate market, house and land transactions increased in Poush. Land Revenue Offices handled 162,877 transactions nationwide, up from 158,899 in Mangsir. Revenue from property transactions rose to over Rs 5.17 billion, compared to Rs 4.84 billion the previous month. The uptick may be linked to seasonal demand, improved service delivery, or year-end settlements.
Banks tighten collateral lending as non-banking assets rise
Nepali banks have adopted a more cautious approach to collateral-based lending amid a sharp increase in non-banking assets (NBAs) and declining property values. New central bank rules require banks to attempt selling collateral at least three times before taking ownership. With NBAs reaching Rs 51.12 billion, banks are prioritizing loan recovery over collateral acquisition. Savings and credit cooperatives are also affected, with lending limits reduced to 50–60 percent of collateral value from the earlier 80 percent.
Nepal Rastra Bank to revise priority sector lending and loan rules
Nepal Rastra Bank is finalizing changes to loan classification, credit loss management, and priority sector lending guidelines. A committee has proposed extending the period before priority and production-sector loans are classified as non-performing. The review draws on practices in India and Bangladesh and aims to differentiate loans by sector, including agriculture, MSMEs, IT, and tourism. The revisions, expected in the third quarter of the current fiscal year, are intended to improve risk management while supporting targeted credit growth.
Nepal Telecom cancels Rs 5 billion billing system tender
Nepal Telecom has cancelled a nearly Rs 5 billion tender for a new billing system, effectively excluding China’s Huawei from the process. Huawei and Whalecloud were initially shortlisted, but technical, legal, and procurement-related concerns led to the cancellation. The state-owned company plans to issue a fresh tender, allowing previous bidders to reapply. The billing system serves over 15.9 million subscribers and is critical for managing tariffs, subscriptions, and payments. Officials cited inconsistencies with public procurement laws as the primary reason for scrapping the bid.
Paddy production set to fall for first time in four years
Nepal’s paddy output is projected to decline by 4.2 percent to 5.75 million tonnes in FY 2025/26, marking the first drop in four years, according to the Ministry of Agriculture and Livestock Development. Prolonged drought in Madhesh, erratic rainfall, and rural-to-urban migration are cited as key factors. The shortfall of over 205,000 tonnes may push up imports and food prices, disproportionately affecting low-income households.
Commercial bank lending jumps by Rs 1.05 trillion in Poush
Commercial banks in Nepal recorded a sharp rise in lending during Poush, with total loans increasing by Rs 1.05 trillion to Rs 51.57 trillion from Rs 50.52 trillion in Mangshir, according to the Nepal Bankers’ Association. The growth was driven by higher demand for consumer, housing, vehicle, and share-backed loans, along with year-end loan “evergreening” practices. Deposits rose by Rs 1.3 trillion, largely supported by remittance inflows. Bankers note that lending typically increases in Poush due to tax payments and year-end business activity, calling the surge largely seasonal. With Rs 11.33 trillion still available as creditable funds, banks retain room for further loan expansion.
Nepal increasingly spends foreign aid outside the national budget
According to the Ministry of Finance’s Development Cooperation Report 2022/23, 22.5 percent of Nepal’s foreign development assistance was spent outside the national budget system. Nepal received $1.4 billion in aid during the fiscal year, but only $309.3 million was reflected in the budget, with just 40.3 percent spent through the government treasury. Off-budget spending rose by 1.7 percent compared to the previous year, continuing a four-year upward trend. Meanwhile, actual aid inflows have declined steadily, falling from $2 billion in FY 2019/20 to $1.4 billion in FY 2022/23.
269 shareholders hold over 0.5% stakes in 18 commercial banks
A total of 269 individuals and institutions own more than 0.5 percent shares across Nepal’s 18 commercial banks. Siddhartha Bank has the highest number of such shareholders at 34, followed by Global IME, Machhapuchhre, and Prime Bank with 18 each. Institutional investors such as the Employees Provident Fund and Citizen Investment Trust hold stakes in most banks, while prominent business families—including the Chaudhary, Khetan, Dugad, Agrawal, Kedia, and Mahto groups—continue to exert significant influence. The ownership structure reflects a blend of institutional participation and family-led investment within the banking sector.
Gandaki Province legalizes ride-sharing with new rules and fees
Gandaki Province has formally legalized ride-sharing services after revising earlier regulations to address ambiguities. Under the new framework, four-wheeled vehicles with up to five seats can operate within a 50-kilometer range. Annual service fees have been reduced to Rs 2,500 for two-wheelers and Rs 10,000 for four-wheelers. Ride-sharing companies must deposit 2 percent of each transaction into the provincial fund. Penalties include Rs 100,000 fines for operating without permits, with lower fines for offline services. A monitoring committee has been formed to oversee compliance, and all service providers must renew permits annually.
Government steps up market inspections, penalizes violators
The Department of Commerce, Supply, and Consumer Protection intensified market inspections in the Kathmandu Valley, monitoring 51 businesses over three days. Several firms were fined, including Khiling Marketing Pvt. Ltd. (Rs 50,000) and New Shiv Store (Rs 201,000), while others were ordered to submit explanations. Common violations included lack of registration, missing maximum retail price labels, relabeling, and manipulation of product weight and quality. Authorities are also reviewing price chains to curb artificial inflation and black marketing under the Consumer Protection Act.
Nepal Oil Corporation prepares for fuel demand spike during elections
Nepal Oil Corporation expects fuel demand to rise by up to 25 percent during the upcoming elections. Managing Director Chandika Prasad Bhatt said depots will maintain adequate stocks, supported by up to 1,800 tanker trucks and expanded storage facilities. The Motihari–Amlekhgunj pipeline continues to reduce transportation costs, helping stabilize fuel supply during potential border disruptions.
DoTM extends embossed number plate deadline to 2028
The Department of Transport Management has extended the embossed vehicle number plate project deadline by three years to December 2028 after delays caused by last year’s Gen-Z protests. A fire during the protests destroyed over 850,000 plates and equipment. Implemented by Decatur–Tiger IT, the project aimed to install 2.5 million plates but has fitted fewer than 100,000 vehicles so far. Under revised terms, the department will share losses while installation continues under the extended timeline.
Government allocates over Rs 19 billion for March 5 HoR election
The government has released Rs 19.21 billion for the upcoming House of Representatives election, with the largest share allocated to security. Finance Minister Rameshore Khanal said the election will be funded entirely through domestic resources. Authorities estimate the election could inject around Rs 180 billion into the economy, stimulating overall demand.
Sugarcane harvest gains momentum with timely mill payments
Farmers in Morang, Sunsari, Nawalparasi, Kapilvastu, Kailali, Kanchanpur, and Madhesh are actively harvesting sugarcane ahead of the Falgun 21 elections. Mills are making payments within a week of delivery, with the government-set support price at Rs 690 per quintal. Around 13,000 farmers cultivated sugarcane on 9,600 hectares this season, producing an estimated 30 million quintals. Farmers report improved incomes, smoother market access, and reduced reliance on Indian buyers.
Insurance companies face penalties for missing AGM deadlines
Dozens of insurance companies in Nepal are set to pay fines for failing to hold Annual General Meetings within the legally required timeframe. By the end of Poush, only 18 insurers had completed AGMs for FY 2081/82. Regulators warn that delays not only invite penalties under the Insurance Act, 2079, but also raise serious concerns over corporate governance and financial discipline.
Nepal Airlines seeks loan relief talks with EPF and CIT
Nepal Airlines Corporation has begun discussions with the Employees Provident Fund and Citizen Investment Trust to address growing aircraft loan liabilities. Although the airline has repaid Rs 539.55 million, outstanding debt continues to increase due to grounded aircraft and operational challenges. The talks focus on debt reconciliation, repayment restructuring, and possible interest relief, while EPF and CIT aim to safeguard public funds.
IPPAN urges parties to adopt private sector–friendly energy policies
The Independent Power Producers’ Association, Nepal has called on political parties to prioritize energy-sector reforms in their election manifestos. IPPAN urged amendments to the Electricity Act and the adoption of a multi-buyer, multi-seller power market. The association noted that the private sector has already generated over 3,300 MW of electricity with investments exceeding Rs 1.3 trillion, stressing the need for clear policies to meet future energy goals.
Exports via Birgunj customs rise 52% in first half
Exports through Birgunj Customs surged 52 percent in the first half of the fiscal year, reaching Rs 48.1 billion. Processed soybean oil led shipments, followed by sunflower oil, fruit juice, palm oil products, and garments. Officials credit improved customs management and growing demand for processed goods, noting a shift toward value-added exports.
Rudraksha exports to China begin via Kimathanka border
Rudraksha exports from Bhojpur and Sankhuwasabha have begun through the Kimathanka border for the first time, reducing transport costs and transit time. The new route offers faster access to Chinese markets while creating local employment opportunities. Annual exports to China and India total around 600,000 kg.
Nepal and India sign MoU on pre-arrival export data exchange
Nepal and India have signed an agreement to electronically share export data before goods arrive at customs points. The move aims to improve risk assessment, speed up clearance, and strengthen trade security. Initially covering selected goods, the arrangement may later expand to all exports.
Tatopani border reopening delayed after wildfire damage
The Tatopani (Nyalam-Khasa) border remains partially closed after a wildfire damaged China’s customs infrastructure. Although the fire has been controlled, regular trade has yet to resume, leaving around 400 containers stranded. Full operations will depend on the restoration of China’s customs systems.
Karnali provincial offices spend less than 10% of capital budget
Government offices in Jumla under the Karnali Provincial Government spent only 9.4 percent of their capital budget in the first five months of the fiscal year. Officials cite disruptions from last year’s protests as a key reason for the slow spending.
Government orders closure of extra cooperative branches
The government has instructed cooperative institutions to shut down excess branches and tighten lending practices. New rules limit individual loan exposure to 10 percent of share capital and cap sectoral lending at 25 percent. The measures aim to strengthen oversight and reduce financial risk within the cooperative sector.
Annapurna Base Camp set for electricity and 4G expansion
Plans are underway to extend electricity and mobile network services to Annapurna Base Camp in Myagdi. A joint technical survey has been completed to assess feasibility. The expansion is expected to enhance tourist safety, communication, and overall trekking experience in the high-altitude destination.
Comment