KATHMANDU: Economic Digest presents a brief yet comprehensive roundup of major business developments in Nepal, delivered in clear and accessible summaries.
Nepal’s economy is witnessing a combination of rising market optimism and deep-rooted structural challenges. Strong gains in the stock market, increasing industrial registrations, expanding hydropower projects, and growing labor migration to European countries reflect improving investor confidence and broader economic activity.
At the same time, reforms proposed by regulators and financial institutions—including extending PEVC lock-in periods, revising tax policies, and tightening procurement rules—show increasing efforts to strengthen financial governance and infrastructure implementation.
However, major concerns persist over weak public spending, rising government arrears, poor coordination among state agencies, and the continued dominance of the informal economy, particularly in Madhesh Province. Slow capital expenditure in Karnali, damage to public infrastructure due to institutional inefficiency, and repeated fuel price hikes in India also point to inflationary and administrative pressures that could affect economic stability.
Overall, the developments suggest Nepal’s economy is expanding in some sectors, but long-term growth will depend on stronger governance, efficient budget execution, and better regulatory enforcement.
NEPSE rises 27.85 points as turnover approaches Rs 6 billion
The Nepal Stock Exchange (NEPSE) climbed 27.85 points on Monday to close at 2,786.35, driven by stronger investor participation and higher trading activity at the beginning of the week. Daily turnover reached nearly Rs 5.99 billion, with over 14.54 million shares of 342 companies traded through 74,856 transactions. Share prices of 235 companies increased, while 28 declined and seven remained unchanged. Among sectoral indices, hydropower rose 1.50 percent, manufacturing and processing gained 1.35 percent, hotels and tourism advanced 1.02 percent, and microfinance increased 0.99 percent. Mutual funds were the only sector to post a decline, slipping 0.20 percent.
Gold and silver prices rise in domestic market
Gold and silver prices increased significantly in the domestic market on Monday. According to the Federation of Nepal Gold and Silver Dealers’ Association, the price of fine gold rose by Rs 1,900 per tola to reach Rs 292,800. Gold had traded at Rs 290,900 per tola on Sunday. Similarly, silver prices increased by Rs 40 per tola, rising from Rs 5,010 to Rs 5,150.
Experts call for higher tobacco tax in upcoming budget
Health and economic experts have urged the government to significantly raise taxes on tobacco, alcohol, and sugary drinks in the upcoming fiscal budget. During a national policy discussion, researchers from the Nepal Development Research Institute said Nepal currently has the lowest tobacco tax rate in South Asia at 41 percent, contributing to rising public health costs linked to cancer and cardiovascular diseases. Experts argued that annual tax increases of 3 to 5 percent are insufficient to reduce consumption and recommended gradually increasing tobacco taxes to 50 percent by 2035 to discourage usage, especially among young people, while boosting state revenue and reducing long-term healthcare expenses.
Land Ministry arrears climb to Rs 13 billion
Outstanding arrears under the land administration sector of the Ministry of Land Management, Cooperatives, and Poverty Alleviation have reached Rs 13.247 billion. During a presentation to the Public Accounts Committee, officials stated that Rs 7.12 billion requires administrative regularization, Rs 6.03 billion is due for recovery, and Rs 125.6 million remains tied up in advance payments. Nearly all arrears are linked to the Department of Land Management and Archives and its subordinate offices. Major factors include disputes related to a 36 percent income tax assessment on property transactions and an unpaid Rs 1.97 billion penalty involving encroached public land along the Dhobi Khola corridor in Chabahil, Kathmandu.
SEBON moves to extend lock-in period for PEVC funds
The Securities Board of Nepal (SEBON) has completed preliminary preparations to extend the mandatory lock-in period for Private Equity and Venture Capital (PEVC) funds in a bid to safeguard retail investors. The proposed amendment targets PEVC funds that currently exit listed companies—particularly hydropower firms—soon after initial public offerings (IPOs) under the existing one-year lock-in provision. In contrast, promoters, project-affected locals, and employees are subject to a three-year restriction. A study committee formed by SEBON has already submitted recommendations highlighting the risks of rapid capital exits and overvalued share dumping in the secondary market. The revised lock-in framework is expected to be formalized after the appointment of a new SEBON chairperson.
Industrial registrations reach 654 with proposed investment of Rs 447 billion
Nepal registered 654 new industries during the first nine months of the current fiscal year 2025/26, signaling a notable rise in industrial expansion. According to the Department of Industry, the newly registered firms proposed investments worth Rs 447.75 billion and projected the creation of 33,168 jobs. The figure reflects strong momentum compared to the 700 industries registered throughout the entire previous fiscal year. With these additions, the total number of registered industries in Nepal has reached 11,010, with cumulative proposed investment exceeding Rs 3.727 trillion and projected employment of around 785,000 people.
Bankers seek corporate tax cuts and financial reforms
The Nepal Bankers’ Association has submitted a set of policy recommendations to the government ahead of the upcoming national budget, calling for major tax and financial reforms. The association proposed reducing the corporate income tax rate for banks and financial institutions from 30 percent to 25 percent to align with other business sectors. It also recommended lowering the tax on individual deposit interest from 6 percent to 5 percent and revising the entry threshold for the 1 percent income tax slab to Rs 1 million. In addition, the association suggested capping the maximum income tax rate at 25 percent, shortening tax reassessment periods from four years to two years, adopting market-based interest benchmarks, and increasing tax-exempt donation limits for institutions from Rs 100,000 to Rs 500,000.
Informal economy remains dominant in Madhesh Province
A study conducted by Nepal Rastra Bank (NRB) has found that a significant portion of Madhesh Province’s economy continues to operate informally due to weak regulation and unregulated cross-border trade. The report estimates the province’s GDP at Rs 863.33 billion, with economic growth projected at just 1.31 percent in fiscal year 2025/26 and per capita GDP at USD 934. While vegetable farming expanded by 45.24 percent, production of food grains and cash crops declined. Separately, the Office of the Auditor General reported financial irregularities worth Rs 1.87 billion in the province—the highest among all provinces. Total outstanding irregularities have now reached Rs 10.98 billion, with nearly 60 percent linked to the Ministry of Physical Infrastructure Development.
Butwal–Palpa tunnel project speeds up ahead of October operation target
Construction work on the tunnel project along the Butwal–Palpa section of the Siddhartha Highway has accelerated with the goal of bringing the tunnel into operation by October. Built under the Engineering, Procurement and Construction (EPC) model, the project assigns full responsibility for design, construction, maintenance, and security to the contractor. The tunnel has achieved 68 percent physical progress and 58 percent financial progress so far. Although the initial estimated cost was around Rs 10 billion, the contract was later awarded for approximately Rs 7 billion through competitive bidding. The project is expected to improve safety and reduce risks along the landslide-prone highway section.
Karnali records weak capital expenditure performance
The Karnali Province government spent only 29.3 percent of its annual budget during the first 10 months of the current fiscal year, reflecting slow progress in development spending. According to the Provincial Comptroller Office, only Rs 9.635 billion of the allocated Rs 32.996 billion budget had been utilized by mid-May. Capital expenditure stood at just 21.53 percent, while recurrent expenditure reached 41.37 percent. The Ministry of Physical Infrastructure and Urban Development, which holds the province’s largest development budget, spent only Rs 2.229 billion out of Rs 10.731 billion. Similarly, the Ministry of Land Management, Agriculture, and Cooperatives used only Rs 520.2 million from its Rs 2.571 billion allocation.
338 local units complete land classification process
A total of 338 local governments across Nepal have completed land-use classification work required under the Federal Land Use Act by April 13. According to the Ministry of Land Management, Cooperatives, and Poverty Alleviation, 169 local units finalized zoning maps and parcel-level records, while 15 completed agricultural land assessments. Another 134 local bodies are updating digital land maps and 50 are still preparing basic classification criteria. However, 47 local governments have yet to begin the process. The federal government has set July 16 as the final deadline for all local units to complete land classification aimed at protecting agricultural land, controlling fragmentation, and managing urban expansion.
More Nepali workers choosing Europe over Gulf countries
An increasing number of Nepali migrant workers are choosing European destinations over Gulf countries for foreign employment. During the first 10 months of fiscal year 2025/26, 60,439 Nepali workers obtained labor permits for six European countries, according to the Department of Foreign Employment. Romania received the highest number of workers at 28,594, followed by Croatia with 14,000, Portugal with 7,348, Malta with 5,239, Cyprus with 6,539, and Austria with 1,700. The figure marks a notable rise from 45,273 permits issued during the same period last year. Most workers—57,948 individuals—traveled through individual visa arrangements rather than institutional recruitment channels, pushing recruitment costs between Rs 700,000 and Rs 1.6 million due to limited bilateral oversight.
Poor coordination causes Rs 65.9 million damage to water pipelines in Kathmandu
The Office of the Auditor General’s 63rd annual report has revealed that poor coordination among public agencies caused Rs 65.9 million worth of damage to drinking water pipelines in the Kathmandu Valley. According to the report, construction activities carried out by the Nepal Electricity Authority caused Rs 16.7 million in damages, while the Department of Roads was responsible for Rs 20 million and Lalitpur Metropolitan City for Rs 11.2 million. Other agencies accounted for an additional Rs 17.1 million in losses. The audit also questioned the government’s failure to recover Rs 2.599 billion in performance guarantees linked to a cancelled wastewater treatment project in Kodku, Sallaghari, and Dhobighat that had been awarded to a foreign contractor for Rs 3.469 billion.
New procurement ordinance bars project shutdowns during disputes
The government has amended the Public Procurement Act, 2006 through a new ordinance that prohibits the suspension of ongoing infrastructure projects due to contractual disputes. The amendment introduces Section 58(A), requiring construction work to continue even while disputes related to land acquisition, payment delays, variation orders, or site availability are being settled through arbitration, mediation, or court proceedings. Experts say the provision aims to prevent prolonged project delays caused by legal and administrative disputes. Construction can now only be halted in cases involving serious technical or engineering flaws, while contractors violating the rule may face legal action.
Valley traffic police fine over 2,400 drivers in 24 hours
The Kathmandu Valley Traffic Police Office took action against 2,453 drivers during a 24-hour enforcement campaign conducted from Sunday to Monday morning, collecting Rs 1.151 million in fines. According to police records, 105 drivers were penalized for driving under the influence, 238 for ride-sharing violations, 184 for jumping red lights, 186 for speeding, 14 for lane violations, 100 for driving on footpaths, 119 for improper horn use, 139 for one-way violations, and 1,368 for other traffic offences.
Repeated fuel price hikes in India may raise inflation pressure in Nepal
India has once again increased domestic fuel prices, raising concerns over inflationary pressure in Nepal, which relies entirely on Indian petroleum imports. Petrol prices increased by INR 2.61 per litre and diesel by INR 2.71 per litre, pushing retail prices in New Delhi to INR 102.12 for petrol and INR 95.20 for diesel. This marks the fourth fuel price hike in May, following earlier increases on May 15, 19, and 23. Since Nepal imports all refined fuel products from India, analysts warn the repeated hikes are likely to increase transportation costs and fuel prices in Nepal as well.
Swabhimaan Microfinance withdraws planned 10 percent dividend
Swabhimaan Microfinance has cancelled its previously announced 10 percent dividend distribution for shareholders. The decision was made during a board meeting held on May 22, reversing an earlier proposal from February 27 that had included 9.5 percent bonus shares and a 0.5 percent cash dividend. The company stated that regulatory revisions, auditing adjustments, and directives from Nepal Rastra Bank made it difficult to maintain the proposed distribution while preserving financial stability and compliance standards.
Lower Seti hydropower project to be developed in Tanahun
A 126 MW Lower Seti Hydropower Project is set to be constructed in Tanahun with an estimated investment of USD 227 million supported by the Asian Development Bank. According to Project Chief Hari Kumar Shrestha, the financing structure will consist of 30 percent equity and 70 percent loans. The semi-reservoir project will have its dam located in Bandipur-6 and Devghat Rural Municipality-3, while the powerhouse and staff quarters will be constructed in Devghat Rural Municipality wards 3 and 4. Authorities have already begun acquiring around 74,275 square meters of land required for the project infrastructure.
Comment