Nepal’s Exports Began Sharp Decline after Royal Massacre of 2001: NRB Governor

Nepal Rastra Bank's (NRB) 18th Governor Biswo Poudel has said that Nepal’s export, which once contributed above 40 percent to the national GDP, started to decline sharply after the Royal Massacre of 2001.

Addressing a talk session at the Department of International Relations and Diplomacy, Tribhuvan University, on Friday, Governor Poudel linked the massacre and the decade-long armed conflict that followed to a turning point in Nepal’s economic trajectory.

Speaking to students, he highlighted that over the past two decades Nepal’s economy has been repeatedly strained by shocks: the Maoist insurgency after the royal massacre, the 2015 earthquake that caused more Rs 400 billion in damages, the economic blockade following the quake, and most recently the Covid-19 pandemic. “These four shocks were huge for a country like ours to face, and the impact continues to linger. No country in their history might have felt the shocks that Nepal faced during these years,” he said.

Poudel also drew attention to Nepal’s rising debt burden. Over the last decade, external and internal loans have jumped from Rs 700 billion to Rs 2,700 billion, while revenue generation has remained stagnant, raising concerns about economic mismanagement and sustainability. Nepal currently carries more than USD 10 billion in foreign debt with an average interest rate of 0.7 percent, according to the governor.

At the same time, the country holds over Rs 21 billion in foreign assets – including Rs 10 billion in the US Treasury, Rs 1.5 billion in Switzerland, and around Rs 400 billion in Indian currency – with an average return of 4.5 percent, he added. Despite these reserves, Poudel noted that “disproportionate public spending in the past decade has created difficulties in keeping the economy afloat,” forcing Nepal to depend increasingly on private sector contributions and foreign aid.

He criticised the sluggish pace of development projects. The proposed 27-kilometre Peripheral Ring Road, estimated at USD 250 million, has made little progress even a decade after its announcement, he said, adding, “While local governments have been quicker in execution for projects, major national projects remain stuck due to bureaucracy and lengthy donor protocols.”

According to Poudel, domestic borrowing now accounts for 5.5 percent of GDP, with regulatory bottlenecks further complicating resource mobilisation.

Despite these challenges, Poudel pointed to some achievements. Nearly 99 percent of households now have access to electricity, thanks in large part to private sector involvement. Forestry coverage has rebounded significantly since its lowest point in 1979, while literacy has improved with nearly every child under five enrolled in school.

Agriculture, however, remains a weak, said Poudel. Although meat production has risen by 150 percent in five years, overall crop production has not matched expectations. Positive stories include banana farming in Chitwan and potato farming in western Nepal, but the country still lags behind neighbours like India and China, which transformed agriculture through green revolutions.

Urbanisation has accelerated, with the number of cities expanding rapidly from just five before 2000. Poudel said urban growth is vital, noting that 90 percent of the world’s economy is driven by cities. Projects such as the Kathmandu-Terai Fast Track, expected to be completed within two years, could be transformative, he added.

Concluding his address, the NRB governor said that while foreign loans have been utilised largely in development, “Nepal needs stronger management, faster execution, and bold reforms to overcome its growing debt and revitalise exports.”