Bright Economic Outlook

Nepal's economy is finally showing signs of recovery. The internal and external sectors of the economy had taken crushing blows from COVID-19 pandemic followed by Russia-Ukraine war. But now, the economic indicators are moving in the positive direction. There have been improvements in financial and monetary sectors as well. Without economic reform at the policy level, procedure and institutional levels undertaken by the government, experts say, cannot materialise. The number foreign tourist arrival has returned to the pre-pandemic levels, and along with them, foreign currency reserves have seen an encouraging rise. 

To make things better, inflation has also decreased. According to the Nepal Rastra Bank (NRB) data, consumer price inflation for the first four months of the current fiscal year stands at 5.38 per cent, down from 7.38 per cent in mid-December last year. The foreign exchange reserves increased by 10.2 per cent to Rs. 1696.78 billion in mid-November 2023 from Rs. 1530.36 billion in mid-July 2023. The remittance inflow increased by 26.4 per cent to 477.96 billion over that period. The current balance of payment is at a surplus of 147.11 billion. 

In an effort to provide relief to the entrepreneurs, consumers, businesspersons, and industrialists, the government has taken steps to reduce the bank interest rate. The weighted average inter-bank transaction among the banks has come down to 3.47 per cent from 8.50 per cent during the period. The central bank has also lowered the bank rate from 7.5 per cent to 7 per cent and policy rate from 6.5 per cent to 5.5 per cent.

What's more, this past year, the government has taken significant decisions on infrastructure developments. The decision to go ahead with the construction of Budhigandaki and Karnali Chisapani Reservior-based hydropower projects is a testament to this fact. Similar commitment to build Upper Arun and Dudhkoshi hydropower projects has raised hope that the country will be able to export significantly more electricity in the coming days. With the rapid development of power sector, the installed hydropower capacity has reached 28,000 MW, enough to meet 94 per cent of the country's energy need. 

During Prime Minister Pushpa Kamal Dahal Prachanda's June visit to India, an agreement was signed to sell 10,000 MW of electricity to the southern immediate neighbour in 10 years as well as to finalise the detailed project report of the Pancheshwor multi-purpose project within three months, among others. Similarly, during PM's visit to China in September, both sides agreed to build a 'Trans-Himalayan Multi-Dimensional Connectivity Network' as well as to reopen Nepal-China checkpoints. There were also agreements to give final shape to 'Nepal-China Electric Power Co-operation Plan' in addition to initiate the activities of 200-kV Jilong-Kerung- Rasuwagadhi-Chilime Inter-state Transmission Line as soon as possible. 

Likewise, the national pride project, Pokhara Regional International Airport, inaugurated on January 1, 2023 has made a significant contribution in air connectivity. The government is also gearing up to organise investment summit in Kathmandu from April 21, 2024. Amid brightening economic outlook, there have been complaints about the dearth of good jobs that pay enough to live a decent life. The country has also seen an export decline, with potential job losses in the sector. For example, palm oil worth Rs. 2.47 billion has been exported in the first five months of the current fiscal year, down from 10.87 billion during the same period last fiscal. Measures must be taken to reverse this trend.