Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s economic growth is expected to decelerate sharply to 2.1 percent in fiscal year 2025/26, down from 4.6 percent in FY2024/25, as the country grapples with political instability following the September 2025 public unrest, according to the World Bank’s latest Nepal Development Update released on Thursday.
The report, titled “Reforms to Accelerate Public Investment,” highlights that Nepal’s services sector — a major contributor to the national economy — is likely to experience the most significant slowdown. The World Bank cautioned that the economic outlook remains highly uncertain, hinging largely on the outcome of the ongoing political transition and the government’s capacity to maintain sound economic management.
While the growth rate is projected to rebound to 4.7 percent in FY2026/27 as reconstruction gains momentum, the report stresses that continued uncertainty could dampen investor sentiment and delay private sector recovery.
Finance Minister Rameshore Prasad Khanal said the government had rolled out an Integrated Business Recovery Plan (IBRP) to restore business confidence and stabilize economic activity.
“To restore business confidence and accelerate recovery, the government has launched an Integrated Business Recovery Plan offering grants, tax incentives, and operational support,” Finance Minister Khanal said. “Public resources have been reprioritized toward infrastructure rehabilitation and election preparations, and a Reconstruction Fund has been established to help restore damaged public and private assets.”
According to the World Bank, capital expenditure across federal, provincial, and local levels reached only 7.9 percent of GDP in FY2023/24, far below the 10–15 percent investment required annually to meet the nation’s growing infrastructure needs.
World Bank Division Director for Maldives, Nepal, and Sri Lanka, David Sislen, emphasized that Nepal’s long-term prosperity depends on its ability to boost public investment and strengthen fiscal governance.
“Boosting public investment is critical for improving growth, creating jobs, and building prosperity for Nepalis,” Sislen said. “This requires implementing key reforms — strengthening project planning and budgeting, streamlining land acquisition and environmental clearance, improving cash management, and amending procurement laws to accelerate project delivery.”
The report calls for a comprehensive reform of Nepal’s public investment management system, pointing to chronic bottlenecks such as procedural delays, inefficient fund disbursement, and fragmented project implementation.
The Nepal Development Update, published biannually, provides analytical insights into the country’s macroeconomic performance and places recent trends within a broader regional and global context.
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