Nepal’s economy in the year 2081 BS, ending on Sunday, April 13, reflected cautious optimism amid deep-rooted challenges. While there were modest signs of recovery from the prolonged impact of the COVID-19 pandemic, the gains were largely quantitative rather than qualitative. The external sector remained relatively stable, yet the internal economy—particularly public finance management—continued to struggle. A persistent contraction in aggregate demand has dampened economic momentum across sectors.
Despite availability of enough liquidity within banks and financial institutions (BFIs) and a drop in interest rates, credit disbursement has remained notably sluggish—highlighting a lack of investor confidence and weak demand from the private sector.
Read: High-Level Commission Calls for Structural Overhaul to Revitalize Economy
Some analysts pointed to Nepal securing its first sovereign credit rating as a highlight of the year—an achievement signaling improved prospects for international investment. However, the year was also marked by a serious setback: Nepal’s return to the Financial Action Task Force (FATF) grey list.
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Below are some of the key developments from Nepal’s financial sector this year, compiled with inputs from the state-owned news agency, RSS.
Sovereign Credit Rating
Nepal carried out its inaugural sovereign credit rating in 2081. Fitch Ratings assigned Nepal a Long-Term Foreign-Currency Issuer Default Rating (IDR) of ‘BB-’ with a stable outlook. This rating suggests no major barriers exist that would prevent private entities from converting local currency into foreign exchange for debt payments to non-resident creditors.
Read: Fitch Assigns Nepal ‘BB-’ IDR; Outlook Stable
This rating serves as a critical benchmark for international investors and lenders. According to former Finance Secretary Rameshore Khanal, the rating opens the door for Nepal to access international financial markets more easily and potentially issue sovereign bonds.
Fitch’s assessment highlighted that consistent, stable economic growth—especially when supported by improved governance and regulatory standards conducive to private and foreign investment—could lead to an upgrade. On the flip side, risks such as a significant rise in the debt-to-GDP ratio, weakened support from development partners, or declining growth prospects could trigger a downgrade.
Nepal on FATF Grey List, Again
In February, Nepal was placed back on the Financial Action Task Force (FATF) grey list for failing to implement adequate anti-money laundering and counter-terrorist financing measures. This decision, taken during the FATF’s plenary session in Paris, reflected Nepal’s insufficient efforts to curb illicit financial activities.
FATF identified seven areas needing urgent reform and called on Nepal to develop a time-bound, comprehensive action plan. The reclassification not only places Nepal under increased international monitoring but also signals elevated financial risk to global investors.
Read: Compliance Failures Result in FATF Graylisting
This is not Nepal’s first time on the grey list—it previously faced similar scrutiny between 2008 and 2014 before being removed following regulatory reforms. Its return underscores concerns over political inertia and weak enforcement in tackling financial crime.
Third Investment Summit
The third edition of the Nepal Investment Summit (NIS), held on April 28–29 in Kathmandu, aimed to attract foreign and domestic investment. Although the government touted the event as a success, the summit failed to translate into actual commitments for major projects it showcased.
Read: Nepal Investment Summit 2024 Fails to Attract Investors
With over 2,500 participants, including more than 800 international delegates, expectations were high. However, the event revealed persistent barriers to investment, such as bureaucratic inefficiencies, legal ambiguities, and regulatory uncertainties. Despite its high-profile nature, the summit ultimately raised more questions than it answered regarding Nepal’s investment-readiness.
Growing Public Debt
Nepal’s public debt continued to rise throughout 2081. By mid-March (the end of Falgun), total outstanding debt had reached Rs 2.676 trillion, accounting for 46.91% of GDP.
Exchange rate fluctuations contributed significantly, adding Rs 66.29 billion to the debt load, reported RSS. The split between external and domestic borrowing remains nearly even: 50.83% (Rs 1.36 trillion) is external debt, while 49.16% (Rs 1.315 trillion) is domestic.
Implementation of the 16th Periodic Plan
The fiscal year 2024/25 marks the commencement of Nepal’s 16th Five-Year Periodic Plan. The plan outlines ambitious goals focused on good governance, social justice, and inclusive prosperity.
Key targets include achieving a 7.3% average economic growth rate and increasing per capita income to $2,413 by 2028/29. Other goals include reducing absolute poverty to 12%, containing inflation under 5%, and improving Nepal’s Human Development Index (HDI) to 0.65 and Human Asset Index (HAI) to 78.
Record-High Gold Prices
Gold prices in Nepal hit historic highs in 2081. On Friday, April 11, fine gold was traded at Rs 185,000 per tola (11.66 grams), according to the Federation of Nepal Gold and Silver Dealers Association.
Gold rallied this year to record highs globally, largely due to geopolitical tensions—including the Russia-Ukraine war and conflicts in the Middle East—as well as interest rate cuts by major central banks in the US and Europe. In March, gold broke through the $2,160 per ounce barrier, and the rally continued through April and May before a temporary dip in June. By July, prices had reached new record levels again.
Read: US-China Trade Tensions Push Gold Price to Record High
Globally, gold surpassed $3,219.84 per ounce on April 11, according to Reuters, driven by a weakening US dollar, tariff conflicts, and growing investor uncertainty.
Establishment of the Cooperative Regulatory Authority
On December 29, the government issued an ordinance amending cooperative laws, paving the way for the formation of the National Cooperative Regulatory Authority. The authority, tasked with regulating registration, supervision, and reporting systems of cooperatives—particularly savings and credit institutions. formally began operations a month later.
Read: National Cooperative Regulatory Authority Begins Oversight of Savings and Credit Cooperatives
Earlier in May, a special parliamentary committee was formed to investigate the widespread misuse of cooperative savings. It submitted its findings in September. Subsequently, numerous arrests were made, including that of Rastriya Swatantra Party Chair Rabi Lamichhane, who was detained on October 18 for his alleged involvement in misusing cooperative funds.
Read: Rabi Lamichhane Arrested for Alleged Involvement in Misuse of Cooperative Funds
Key Economic and Financial Indicators
According to Nepal Rastra Bank (NRB), year-on-year consumer price inflation eased to 3.75% in mid-March 2025, down from 4.82% a year earlier.
During the first eight months of the fiscal year, exports grew by 57.2% to Rs 158.17 billion, while imports rose by 11.2% to Rs 1.145 trillion. Remittance inflows increased by 9.4% to Rs 1.051 trillion. The current account remained in surplus at Rs 180.08 billion. The overall balance of payments also registered a surplus of Rs 310.37 billion.
Read: Inflation Moderates to 3.75 Percent in mid-March
Foreign exchange reserves grew by 8% to Rs 2.409 trillion in the period, enough to cover 17.2 months of merchandise imports and 14.3 months of combined goods and services imports. However, capital expenditure remained weak. The government spent only Rs 82.33 billion—or 23.37%—of its unrevised capital expenditure allocation within the first eight months of the fiscal year. Originally budgeted at Rs 352.35 billion, the capital expenditure target was later revised down to Rs 299.5 billion.
Although deposits at BFIs continued to rise—mainly due to strong remittance inflows—credit expansion has lagged. NRB data shows BFIs increased lending by Rs 304.82 billion by mid-March, reflecting only a 6% year-on-year rise. This figure is far below the NRB’s projected 12.5% annual growth target, which would require approximately Rs 650 billion in new lending. Only about half of that goal has been achieved thus far.
A Challenging Year for the Global Economy
The global economic environment in 2081 remained fraught with volatility. Geopolitical tensions, trade disputes, and ongoing conflicts—particularly in Ukraine and the Middle East—disrupted supply chains and sparked food and energy crises.
Read: China Slaps 125% Tariffs on US Goods
The return of Donald Trump to the White House added a new layer of unpredictability, as his administration implemented aid cuts and imposed new tariffs, drawing criticism from trading partners and allies alike. Discussions at the BRICS summit about reducing dependence on the US dollar were met with warnings of sanctions from Washington.
Read: Trump Limits Tariffs on Most Nations for 90 days, Raises Taxes on Chinese Imports
Meanwhile, technology continued to reshape the financial world. The rapid advancement of artificial intelligence and the growing influence of fintech—especially in digital wallets, e-commerce, and open banking—are revolutionizing global financial systems and consumer behavior alike.
Read: Trump’s ‘America First’ Policy Leads to Suspension of USAID-Funded Projects in Nepal
(With inputs from RSS)
