Nepal’s FDI inflow rebounds to Rs 12.02 billion in FY 2024/25, Signaling renewed investor confidence

KATHMANDU: Nepal’s net foreign direct investment (FDI) inflow has staged a notable recovery in the current fiscal year, rising to Rs 12.02 billion in FY 2024/25, according to official data compiled in the latest chart.

The rebound marks a sharp improvement from Rs 8.47 billion in FY 2023/24 and Rs 5.96 billion in FY 2022/23, indicating a gradual restoration of investor confidence in Nepal’s economy after several years of volatility.

The trend, however, also highlights the country’s persistent struggle to maintain a stable and consistently rising FDI trajectory.

While the latest figure is encouraging, it still remains well below the peaks recorded during the pandemic period, when net FDI inflows reached Rs 19.51 billion in FY 2020/21 and Rs 18.56 billion in FY 2021/22. In FY 2019/20, Nepal had already attracted a strong Rs 19.48 billion, while inflows stood at Rs 13.07 billion in FY 2018/19.

This uneven pattern reflects deeper structural issues in Nepal’s investment climate. Political uncertainty, frequent policy changes, regulatory bottlenecks, land acquisition hurdles, and delays in project approvals have repeatedly discouraged long-term foreign investors.

At the same time, improvements in macroeconomic stability, foreign exchange reserves, and balance-of-payments position over the past year have helped rebuild confidence, contributing to the uptick in FY 2024/25.

For Nepal, FDI is not merely a capital inflow; it is a strategic necessity for economic transformation. As a developing economy with limited domestic savings and a narrow industrial base, Nepal depends heavily on external investment to finance infrastructure, industrial expansion, technology transfer, and job creation.

Unlike short-term portfolio flows, FDI brings long-term commitments in sectors such as hydropower, manufacturing, tourism, information technology, and services, all of which are critical for sustainable growth.

FDI plays a direct role in strengthening Nepal’s balance of payments. By bringing in foreign currency, it helps ease pressure on foreign exchange reserves and supports import financing, particularly for capital goods and technology.

This is crucial for an import-dependent economy like Nepal, where trade deficits remain structurally high. Higher and stable FDI inflows also reduce excessive reliance on remittances, which, although vital, do not directly build productive capacity.

The rebound to Rs 12.02 billion suggests that recent policy reforms are beginning to show results. Measures such as amendments to the Foreign Investment and Technology Transfer Act, efforts to simplify approval processes, and renewed focus on public–private partnerships have improved perceptions among international investors.

The government’s push to attract investment in hydropower, green energy, digital infrastructure, and manufacturing aligns with global investment trends and Nepal’s own development priorities.

However, the data also underscores that Nepal is still far from realizing its FDI potential. Neighboring economies attract several times more foreign investment annually, reflecting stronger institutions, clearer policies, and faster project execution.

For Nepal to move beyond cyclical rebounds, it must ensure policy stability, predictable taxation, efficient dispute resolution, and transparent regulatory practices. Investors prioritize certainty over incentives; without institutional credibility, headline reforms will not translate into sustained capital inflows.

Sectoral diversification is equally important. Nepal’s FDI remains concentrated in hydropower, tourism, and a few service industries.

Expanding into manufacturing, export-oriented industries, information technology, and high-value agriculture would create stronger backward linkages in the economy, raise productivity, and generate higher-quality employment.

This would also help Nepal move up global value chains rather than remaining primarily a consumption-driven economy.

The FY 2024/25 recovery should therefore be viewed as a positive signal, not a final achievement. Sustained FDI growth is essential for Nepal’s long-term economic resilience, industrialization, and competitiveness.

If backed by consistent reforms, political stability, and credible governance, rising foreign investment can become a cornerstone of Nepal’s transition from a remittance-dependent economy to a production- and investment-led growth model.