Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: The World Bank has revised Nepal’s economic growth projection to 4.6 percent for FY2024/25, down from its previous estimate of 5.2 percent, citing sluggish private investment, weak export performance, and delays in policy reforms. The update was published in the latest South Asia Development Update (SADU) 2025 report released on October 3, 2025.
According to the report, Nepal’s economy has struggled to sustain post-pandemic momentum due to low capital expenditure, declining remittance inflows, and reduced consumer demand. The World Bank warned that political instability and frequent government changes have further constrained fiscal implementation, delaying key infrastructure and reform projects.
The report highlights that Nepal’s growth in FY2023/24 stood at 3.9 percent, well below the regional average, as the country faced declining agricultural productivity and weak industrial output. For FY2024/25, growth is expected to improve slightly to 4.6 percent, supported by hydropower exports to India and Bangladesh, moderate remittance recovery, and lower inflation.
Inflation in Nepal has eased to 4.9 percent, aided by stable global fuel prices and a steady Nepalese rupee. However, the World Bank cautioned that structural weaknesses in Nepal’s economy—particularly its reliance on remittances and imports—pose long-term challenges to sustainable growth.
Nepal’s current account deficit is projected to narrow due to rising hydropower exports, which reached over 1,000 MW daily in mid-2025. The report praised Nepal’s clean energy initiatives, calling them a “critical driver of long-term export revenue and foreign exchange stability.”
However, the Bank expressed concern about Nepal’s slow progress in capital mobilization, particularly in the private sector. The country’s credit growth remains sluggish despite record-high liquidity in the banking system, reflecting low business confidence.
The report also touched upon the social unrest and political uncertainty that emerged in September 2025, noting that it may have a short-term impact on investor sentiment and public spending efficiency.
At the regional level, South Asia’s growth is projected at 6.0 percent, driven by strong performances in India and Bangladesh. However, Nepal, Sri Lanka, and Pakistan are expected to experience moderate growth due to structural imbalances and fiscal constraints.
The World Bank recommended that Nepal prioritize fiscal discipline, energy sector efficiency, digital governance, and investment reforms to restore momentum. It also advised the government to accelerate large-scale infrastructure projects and enhance public-private partnerships to revive economic activity.
“Nepal’s medium-term prospects depend on how effectively it manages its hydropower export potential and translates its liquidity surplus into productive investments,” the report stated, urging policymakers to improve institutional accountability and financial governance.
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