KATHMANDU: Economic Digest offers a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries.
Nepal’s economy is showing mixed signals as political uncertainty ahead of the March 5 elections weighs on market confidence, reflected in a marginal decline in the NEPSE index and a sharp drop in trading turnover, even as select sectors such as tourism and IPO activity show resilience. The banking sector remains under strain, with rising non-performing loans highlighted both by domestic data and an external audit, underscoring deeper structural issues including weak credit growth, asset quality concerns and capital adequacy gaps amid a sluggish economy.
At the same time, longer-term fundamentals appear cautiously positive, driven by record international passenger traffic, rapid expansion in life insurance coverage, growing taxpayer registration, strong IT service exports and rising electricity exports, particularly to India and Bangladesh. However, persistent bottlenecks, such as stalled large hydropower projects, delayed infrastructure execution, rising essential commodity prices and regulatory challenges, continue to constrain growth.
Together, the data point to an economy stabilizing in pockets but still grappling with systemic risks, where post-election policy clarity, financial sector reform and faster project execution will be critical to sustaining momentum.
NEPSE slips marginally amid election uncertainty
The Nepal Stock Exchange (NEPSE) edged down by 5.35 points, or 0.20 percent, last week to close at 2,708.70, as political uncertainty ahead of the March 5 general election weighed on investor sentiment. During the week, the index fluctuated between 2,659.86 and 2,719.62 points. Sector-wise, hotels and tourism posted the strongest gains at 2.19 percent, while the finance sector declined the most, falling 1.03 percent. SY Panel Nepal recorded the highest turnover at Rs 2.65 billion, and Kalinchowk Darshan Limited emerged as the top gainer with a 34.36 percent rise in share value. Overall market turnover fell by nearly 36 percent to Rs 45.04 billion, while market capitalization dropped to Rs 4.547 trillion, erasing more than Rs 9 billion in investors’ book value.
Economic slowdown pushes up bad loans in banking sector
Non-performing loans in Nepali banks increased during the second quarter of FY 2082/83 (Saun–Pus), with the average NPL ratio rising to 5.07 percent from 4.48 percent a year earlier. Banks attributed the increase to weak economic activity and disruptions caused by the Genji strike, which affected loan recovery. Everest Bank reported the lowest NPL ratio at 0.68 percent, while Himalayan Bank recorded the highest at 7.96 percent. Although some banks improved recovery performance, overall credit expansion and loan collection remain sluggish. The International Monetary Fund has raised concerns over asset quality and required portfolio audits of major banks before releasing extended credit support.
NRB promotes bank accounts for children to encourage savings
Nepal Rastra Bank has encouraged parents to open bank accounts in their children’s names to instill savings habits and support long-term financial planning. The initiative carries no age restriction, allowing accounts to be opened using a birth certificate or minor identification. Until children reach legal adulthood, accounts will be operated by parents or guardians. The central bank expects the move to improve financial literacy and promote a culture of formal savings among younger generations.
Loan review finds 7.7 percent NPL ratio in Nepal’s 10 largest banks
A loan portfolio review conducted by Bangladesh-based Howlader Yunus & Company has found that Nepal’s 10 largest commercial banks have an average non-performing loan (NPL) ratio of 7.7 percent. Submitted to Nepal Rastra Bank, the review revealed that two banks had NPLs exceeding 10 percent, with one reaching 11 percent, while the lowest stood at 4 percent. The report flagged issues such as loan evergreening, overstated financial projections, inconsistent collateral valuation and improper classification of bad loans. It also found that some banks, including Himalayan and Rastriya, failed to meet minimum capital requirements, while four others fell short on primary capital ratios. NRB has said banks will be given the opportunity to respond before corrective measures are taken.
TIA handles record international passenger traffic in 2025
Tribhuvan International Airport (TIA) handled a record 5.04 million international passengers in 2025, marking a 1.64 percent increase from the previous year, according to aviation data. Growth was largely driven by outbound migrant workers and students, while tourist arrivals rose modestly to 1.15 million. The airport managed 34,600 international flights, averaging 95 per day, despite operational challenges caused by ongoing taxiway construction. Nepal Airlines carried the highest number of passengers at 606,333, followed by Air India, Himalaya Airlines and Qatar Airways. Indian carriers increased their market share due to more frequent flights and competitive fares. Capacity is expected to expand after the parallel taxiway project is completed by the end of 2026.
Life insurance coverage reaches half of Nepal’s population
Life insurance coverage in Nepal has expanded to 50 percent of the population as of Poush 2082, up from 43.62 percent a year earlier, according to the Insurance Board. Growth has been driven by increased awareness, branch expansion and the entry of new insurers. The number of active policies reached 1.625 million, while 1.231 million policies remain pending renewal, representing lapsed premiums worth Rs 37.8 billion. Life insurance business grew by 16.47 percent in the first half of the current fiscal year, with total annual premiums amounting to Rs 182.27 billion. Policy surrenders declined by 6.13 percent, indicating stronger consumer confidence.
IPO activity accelerates as approvals pick up pace
Nepal’s capital market has witnessed renewed momentum in initial public offerings, with 10 companies already listing shares since Poush and three more receiving regulatory approval. In FY 2081/82, a total of 19 companies raised Rs 8.07 billion through IPOs. So far in FY 2082/83, 12 approved companies have issued shares, including Super Khudi and Ridgeline Hydropower, which initially targeted locals and migrant workers. Pending IPOs include Snowb Reverse Hydropower, Kalinchok Hydropower and Apollo Hydropower. After a year-long slowdown due to regulatory scrutiny, approvals have resumed, though experts continue to call for faster processing.
Electricity exports earn Nepal Rs 23.73 billion
Nepal exported electricity worth Rs 23.73 billion to India and Bangladesh between mid-June and mid-January, according to the Nepal Electricity Authority. Of this, Rs 19.41 billion was earned in the first six months of the fiscal year. From mid-July to mid-November, Nepal supplied 147.43 gigawatt-hours of electricity to Bangladesh, generating USD 943,600. Most hydropower projects are run-of-river, producing surplus electricity during the monsoon, which enables exports, while winter shortages necessitate imports. Exports to India reached around 1,200 MW under approved quotas, reflecting limited domestic consumption and expanding export capacity.
Most listed life insurers declare dividends, with cash payouts dominant
Eleven of the 12 life insurance companies listed on NEPSE have announced dividends for the previous fiscal year, with only Himalayan Life yet to do so. Companies such as Nepal Life, Asian Life, IME Life, Citizen Life, Sun Nepal Life, National Life, Sanima Reliance Life, Prabhu Mahalaxmi Life, Surya Jyoti Life, Reliable Nepal Life and LIC Nepal have declared dividends comprising both cash and bonus shares, with greater emphasis on cash payouts. Himalayan Life is scheduled to hold its 19th annual general meeting on Magh 28. The dividend announcements reflect sector profitability and improved shareholder returns for FY 2081/82.
IT service exports earn Nepal over Rs 45 billion in six months
Nepal earned more than Rs 45 billion from IT-related service exports in the first six months of the fiscal year, according to Nepal Rastra Bank. IT and telecom services contributed Rs 12.41 billion, while business process outsourcing generated Rs 33.81 billion. Additional earnings included Rs 204 million from digital content creators and audiovisual services, and Rs 7.5 million from cultural services. Net earnings reached Rs 9.14 billion, reflecting a 10 percent year-on-year increase. The government has eased foreign exchange transfer limits and facilitated overseas investment to support sector growth.
Breakthrough achieved in Sabhakhola ‘B’ hydropower tunnel in Sankhuwasabha
The 21.5 MW Sabhakhola ‘B’ Hydropower Project in Sabhapokhari Rural Municipality, Sankhuwasabha, reached a major construction milestone with the breakthrough of its 4,110-metre main tunnel on Monday. The tunnel, which links the intake to the penstock, was inaugurated by Arbit Energy Limited Managing Director Ganesh Karki. With around 75 percent of construction completed, water will be conveyed through a 1,045-metre penstock to the powerhouse and connected to the under-construction NEA substation at Sheetalpati, Khandbari-10. The project, estimated to cost around Rs 5 billion, has also contributed to local employment, education, healthcare, road construction and bridge development.
EIA reports made public for 11 hydropower projects in first half of fiscal year
Environmental impact assessment (EIA) reports for 11 hydropower projects were made public during the first six months of the current fiscal year. Altogether, 19 hydropower projects with publicly available EIA reports account for a combined capacity of 1,530 MW, with the 11 highlighted projects alone estimated to cost more than Rs 349 billion. Major projects include the 98.17 MW Chuwa Khola, 570 MW Humla–Karnali I and II, 306 MW Upper Mugu Karnali, and 35.15 MW Upper Apsuwa Khola. The EIAs outline construction modalities, projected costs, environmental mitigation measures and social responsibility plans, with the projects expected to substantially expand Nepal’s power generation capacity.
Indian firms hold ownership of nearly 5,000 MW of Nepal’s hydropower projects
Indian public and private companies currently hold ownership stakes in hydropower projects totaling nearly 5,000 MW in Nepal, though most have yet to advance to the construction phase. The Nepal government had allocated large-scale projects to Indian firms to attract foreign investment, but progress has remained limited. Apart from the 900 MW Arun-3 project, major ventures such as West Seti (750 MW), Seti River-6 (450 MW), Phukot Karnali (480 MW) and Upper Karnali (900 MW) remain stalled. Legal complexities, procedural delays and financial constraints in Nepal have discouraged investment, leaving many projects inactive despite long-standing ownership agreements.
Number of taxpayers rises sharply in first half of FY 2082/83
Nepal’s active taxpayer base expanded significantly in the first six months of FY 2082/83, reaching 7.36 million—an increase of 361,003 compared to the previous year. Business PAN registrations rose by 55,242 to 2.11 million, while individual PANs increased by 304,890 to 5.20 million. Registrations of foreign employment PANs climbed to 36,741. VAT-registered taxpayers reached 364,992, and customs taxpayers increased to 129,949. Authorities attribute the growth to wider economic activity, improved digital registration systems and enhanced efforts to broaden tax compliance.
India’s draft electricity policy signals fresh export prospects for Nepal
India’s Ministry of Energy has unveiled a draft National Electricity Policy 2026, marking its first major revision in two decades. The policy promotes cross-border electricity trade under the “One Sun, One World, One Grid” initiative and prioritizes renewable energy sources such as solar, wind, hydropower, battery storage and green hydrogen. With India targeting 80 percent non-fossil fuel capacity by 2047, Nepal could benefit from expanded hydropower export opportunities. The policy signals greater regional energy cooperation and potential easing of restrictive import rules, positioning Nepal as a long-term energy partner rather than a seasonal supplier.
Local stakeholders push for fast-tracking Budhigandaki hydropower project
The Dhading Chamber of Commerce and Industry has launched a signature campaign during the 10th Dhading Festival to urge the government to expedite the long-delayed Budhigandaki Hydropower Project. Planned as a 1,200 MW multipurpose reservoir-based project with an estimated cost of nearly Rs 400 billion, Budhigandaki has faced repeated delays over the past 14 years, mainly due to land acquisition and compensation issues. Although around 50,000 residents have already relocated, construction has yet to begin. The project, approved under a public-private partnership model, is expected to generate about 3,383 GWh of electricity annually.
Agriculture ministry distributes Rs 3.05 billion in farmer subsidies
The Ministry of Agriculture and Livestock Development disbursed Rs 3.05 billion in subsidies to farmers in FY 2081/82, primarily for insurance premiums and sugarcane cultivation. Of the total amount, Rs 1.43 billion was allocated for livestock, poultry and fish insurance, while Rs 170.7 million supported crop insurance, covering over 1.6 million animals and 1,677 farmers. Sugarcane farmers received Rs 1.45 billion in subsidies. The ministry also spent Rs 2.726 billion on fertilizer procurement, distributed livestock vaccines, and approved 21 new crop varieties. Production of dairy, meat, fish and eggs increased, while outstanding dues declined by 37.3 percent to Rs 5.76 billion.
Pokharebagar–Ghodapani road completed ahead of schedule
The Pokharebagar–Ghodapani road project in Annapurna Rural Municipality has been completed two months ahead of schedule. Funded with Rs 5 million in the current fiscal year, the project was executed by SS Wilders Pvt. Ltd., which won the contract worth Rs 36.18 million. The upgrades include RCC paving over 300 metres, road widening, drainage improvements and retaining walls in landslide-prone sections. The 21-kilometre road improves access for residents and tourists traveling to Ghodapani-Punhill and connects with the Mid-Hill Highway via Ulleri, enhancing safety and tourism potential.
Election Commission tightens rules on campaign finance management
The Election Commission has introduced new regulations to regulate campaign finances ahead of the 2082 House of Representatives elections. Under the rules, all donations and expenditures must be conducted through bank accounts, regardless of whether transactions are made in cash or by cheque. Donations of Rs 25,000 or more must be deposited directly into banks, while smaller contributions must also be recorded and spent through banking channels. The rules prohibit financial support from government bodies, public institutions, public enterprises and foreign entities, aiming to strengthen transparency, accountability and financial discipline in election campaigns.
Cooking oil and rice prices rise as authorities move to curb hikes
Prices of essential commodities, particularly cooking oil and rice, have surged across Nepal, putting pressure on household budgets. Cooking oil prices have increased by Rs 40–50 per litre to around Rs 280, while rice prices have risen by Rs 10–15 per kilogram. The Nepal Retailer Association said retailers are not responsible for the hikes, citing increased production costs, a stronger US dollar, import expenses and election-related demand. The Department of Commerce, Supplies and Consumer Protection has summoned major producers and distributors, warning of legal action against unfair pricing practices under consumer protection laws.
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