KATHMANDU, May 27: Nepal’s economy is showing mixed signals, with encouraging growth in remittance inflows and foreign reserves but persistent structural challenges in capital expenditure, debt management, and private sector investment, according to the Economic Survey for Fiscal Year 2025/26 unveiled by the government.
The survey projects the national economy to expand by 3.85 percent this fiscal year, estimating its size at Rs 6.6 trillion. Per capita gross national income is expected to reach USD 1,535. Bagmati Province is anticipated to contribute the largest share to national output at 36.7 percent, underscoring its dominance in the country’s economic landscape.
The government highlighted several encouraging trends. Inflation remains under control, remittance inflows surged by 37.7 percent to Rs 1.450 trillion, and the external sector has strengthened. The balance of payments registered a surplus of Rs 658 billion, while the current account showed a surplus of Rs 553 billion. Foreign exchange reserves stood at Rs 3.414 trillion, sufficient to cover 18.5 months of imports — a significant buffer against external shocks.
Local elections: 385 independent candidates secure victory
Despite these gains, the survey underscores critical weaknesses. Capital expenditure has failed to improve, limiting infrastructure development and long-term growth prospects. The trade deficit widened by 11.2 percent, reaching Rs 1.098 trillion, reflecting Nepal’s continued reliance on imports.
Public debt has also expanded sharply. By mid-March, total debt stood at Rs 2.878 trillion, equivalent to 43.6 percent of GDP. The government mobilized Rs 300 billion in loans — both domestic and external — by March 14. Fiscal balance was in deficit by Rs 59 billion, while the primary balance deficit stood at Rs 9 billion, raising concerns about fiscal sustainability.
Although liquidity remains ample in the banking sector, private sector credit growth has been limited to 6.7 percent. Analysts warn this sluggish loan disbursement signals weak private investment and subdued economic activity, which could undermine growth momentum in the coming years.
The survey serves as the foundation for the upcoming national budget, presenting an overview of social infrastructure, governance, public finance, and external sector performance. Policymakers face the dual challenge of sustaining external sector strength while addressing domestic structural bottlenecks.
Experts say the government’s ability to balance fiscal discipline with investment in growth-oriented sectors will be critical as Nepal navigates rising debt obligations and seeks to maintain macroeconomic stability.
-1779842101.webp)
