Nepal Rastra Bank (NRB) has pointed out that the large informal economy in Madhes Province remains a major obstacle to sustainable economic growth. In its Half-Yearly Economic Activities Study Report for Madhes Province , released on June 19, the central bank called for urgent measures to formalize the province’s economic activities and expand the tax base.

The report recommended that provincial authorities promote the formalization of business transactions, improve transparency, and strengthen tax collection mechanisms. According to NRB, a significant portion of the province’s economic activities remains undocumented, limiting government revenue potential.

In addition to the informal economy, the report identified gaps in healthcare infrastructure as another pressing issue. The lack of well-equipped hospitals, skilled doctors, and advanced medical equipment forces many residents in border areas to seek treatment in Indian hospitals, driving up the demand for Indian currency.

The central bank also highlighted the poor quality of public education, insufficient promotion of vocational and technical education, and a lack of resources in rural health centers. It stressed the need to develop major urban centers such as Janakpur and Birgunj into education hubs.

Rapid urbanization without proper waste management has led to growing pollution in major cities. The report urged local governments to improve solid waste management and enhance the province’s appeal for both residents and tourists.

In the agriculture sector, farmers still depend heavily on middlemen due to poor market access. The NRB called for expanding market linkages and ensuring fair pricing mechanisms for agricultural produce. It also emphasized the need to modernize subsistence-based agriculture, improve fertilizer supply chains, and attract youth into agri-businesses.

With many skilled workers from the province migrating abroad, there is an urgent need to create local employment opportunities, particularly for technicians, healthcare workers, teachers, and IT professionals, the report noted. The central bank further stressed the importance of channeling remittances into productive sectors at the local level.

The report also urged the government to develop the province’s tourism potential by conserving and promoting cultural, religious, and natural heritage sites, including the Janaki Temple, Parsa Wildlife Reserve, Koshi Tappu Wildlife Reserve, Sindhuli War Museum, and Bharat Tal.

Timely completion of large infrastructure projects — such as the Postal Highway, Kathmandu-Nijgadh Expressway, President Chure-Tarai Madhes Conservation Program, and Nijgadh International Airport — remains a key challenge, according to the report. Strong coordination among concerned agencies is needed to meet deadlines and budgets.

Lastly, the NRB recommended improving financial literacy, expanding financial access for marginalized groups, and increasing transparency to encourage formalization of the economy and strengthen provincial revenues.

Read full report here: NRB Report