Economic Digest: Key Business Updates from Nepal
Economic Digest: Navigating Nepal’s Business Landscape Amidst Challenges and Opportunities
KATHMANDU: Nepal’s economic and financial landscape is a tapestry of cautious progress interwoven with persistent challenges. Recent developments have painted a complex picture, with the NEPSE index experiencing a dip while investor engagement remains robust.
On Sunday, the Nepal Stock Exchange (NEPSE) index fell by 18 points (0.65%), closing at 2,739.95. Despite this decline, trading activity remained lively, with over 14 million shares worth Rs 6.54 billion exchanged. Notably, 41 companies saw their share prices rise, while 208 faced declines, indicating a mixed sentiment among investors.
In a significant shift, gold prices surged by Rs 2,300 per tola, reaching Rs 197,500, driven by global market trends. In response to rising domestic pressure, the government has removed the 2% luxury tax on gold transactions, a move welcomed by traders but leaving the 13% VAT intact.
Amidst these fluctuations, remittance inflows have provided a silver lining, totaling Rs 1.72 trillion in the fiscal year 2024/25—a 19.2% increase from the previous year. This influx has bolstered foreign exchange reserves by 31.2%, now standing at Rs 2.67 trillion, with the central bank holding Rs 2.41 trillion.
However, the central bank has responded to excess liquidity by withdrawing Rs 50 billion through deposit collection auctions, as the government seeks short-term financing via treasury bills. Plans are underway to raise Rs 5 billion through 28-day treasury bills, with bidding open until 3 PM on August 25.
Despite these positive indicators, Nepal continues to grapple with a chronic trade deficit, recording deficits with 86 out of 111 trading partner countries in the first month of the fiscal year 2025/26. The Department of Customs reported that only 25 countries yielded a trade surplus, highlighting ongoing economic vulnerabilities.
Sector-specific updates reveal a dynamic economic landscape. The microfinance sector has thrived, with 51 out of 52 institutions reporting a combined profit of Rs 842.41 million—a 68.23% increase from the previous year. Additionally, labor permit issuance has surged, with 68,110 permits granted in the first month of FY 2025/26, reflecting growing demand in foreign labor markets.
In a notable development, the government is set to acquire seven Twin Otter aircraft for domestic operations, aiming to enhance air services in mountainous regions. Meanwhile, plans to establish a fertilizer plant are being revived to address ongoing shortages, with discussions underway for collaboration with Indian Oil Corporation.
As Nepal’s economic narrative unfolds, the beer industry is witnessing rising imports of raw materials, while soybean oil has surpassed diesel imports for the first time, signaling evolving consumption patterns. However, long-delayed projects like the Gurgi irrigation initiative and the Muglin–Pokhara road continue to hinder progress.
In the realm of foreign investment, companies have reported significant profit growth, with Rs 2.9 billion in dividends repatriated in the first month of FY 2025/26, a stark contrast to the Rs 64 million from the same period last year.
As Nepal navigates its economic landscape, the interplay of challenges and opportunities continues to shape its future, with stakeholders keenly observing the evolving dynamics.
