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The fiscal year 2024–25 marked a cautiously optimistic phase in Nepal’s post-pandemic economic recovery. With a projected GDP growth of 4.61 percent, a narrowed fiscal deficit and record foreign exchange reserves, Nepal demonstrated notable resilience. However, beneath these surface indicators lies a complex interplay of structural weaknesses, external dependencies and opportunities that deserve closer scrutiny.

What it really means

At first glance, Nepal’s GDP growth of 4.61 percent appears moderate and consistent with a recovering economy. But this figure, while respectable, remains below the 7–8 percent growth rate necessary for rapid poverty reduction and meaningful job creation. The marginal increase in growth from the previous year’s 3.9 percent suggests a slow recovery rather than robust expansion.

More importantly, much of this growth was consumption-led and driven by remittance inflows, rather than investment-led industrial or export expansion. This signals a structural concern: Nepal’s economy continues to lean heavily on external income rather than internal productivity.

Services dominate, industries lag

The composition of GDP reflects deep-rooted imbalances. The services sector contributed over 62 percent to GDP, dwarfing agriculture (25.2 percent) and industry (12.8 percent). While services growth—particularly in transport, storage, and financial activities—is encouraging, it raises questions about sustainability. Services, especially low-productivity informal ones, often expand when there is a lack of industrial dynamism.

The industrial sector, despite moderate growth in construction and manufacturing, remains constrained by infrastructural bottlenecks, power reliability issues and limited domestic and foreign investment. Agriculture, although vital for employment, continues to suffer from low productivity, climate vulnerability and lack of commercialization.

A silver lining?

Headline inflation was 4.72 percent, down from previous years. This reflects effective monetary tightening and better supply chain management. However, food inflation persisted around 3.3 percent, affecting poor households disproportionately.

More analytically, the disinflationary trend owes much to suppressed demand and import-based consumption rather than domestic supply resilience. In a context where inflation in neighboring India remains high, Nepal’s price stability is fragile due to the currency peg and trade dependence. Any external price shock—especially in fuel or food—could reverse the gains swiftly.

Strength built on vulnerability

Remittances grew by 9.4 percent, reaching over Rs 1trn. On the surface, this is a strong signal of income support for households and foreign exchange stability. However, the economy’s growing reliance on labor exports (over 25 percent of GDP) reflects domestic weaknesses in job creation. Migration is not a sign of strength—it is often a symptom of failure to absorb labor at home.

The surge in exports (up 57 percent) is driven by a few commodities like edible oil re-exports and textiles, making it highly sensitive to global demand and bilateral trade policies. The trade deficit remains wide, and Nepal continues to import high-value goods while exporting low-value products—an unsustainable model.

The record-high foreign exchange reserves (covering over 14 months of imports) are welcome but largely attributable to remittances and restrained import demand rather than export competitiveness.

Improved discipline, but at what cost?

Nepal’s fiscal deficit declined sharply—from Rs 70bn to around Rs 16bn in the first eight months—thanks to higher revenue growth and restrained spending. While this reflects improved fiscal discipline, a closer look reveals underperformance in capital expenditure. Many development projects remained delayed or underfunded due to bureaucratic inefficiency, procurement issues and political instability.

Moreover, public debt is at 43.8 percent of GDP—moderate by international standards—but its composition is shifting toward more domestic borrowing, raising concerns over future interest liabilities and crowding out of private investment.

Loosening sans uptake

The Nepal Rastra Bank lowered policy rates to inject liquidity into the economy, leading to historic lows in lending rates. Yet credit uptake remained sluggish, indicating low investor confidence and weak private sector appetite for expansion. The rise in non-performing loans to 4.9 percent underscores emerging stress in the banking system, which could worsen if economic recovery remains tepid.

This disconnect between monetary easing and private sector response suggests deeper structural barriers—legal hurdles, creditworthiness concerns and weak project pipelines.

Climate shocks and structural risks

Nepal’s economic resilience was tested by major floods in mid-2024, causing damage equivalent to 0.8 percent of GDP. This highlights the increasing economic cost of climate change, especially for a country with fragile topography and inadequate disaster preparedness. Yet, climate adaptation and green investment remain minimal in budget allocations.

Additionally, long-term risks—including heavy remittance dependence, trade imbalances, political instability and underemployment—remain unaddressed. These challenges, if not structurally tackled, could stall Nepal’s path to middle-income status.

Conclusion: Resilient, yet restricted

Nepal's economic performance in 2024–25 reflected stability without transformation. The country avoided crisis and managed moderate growth, but it did not make the leap toward a more productive, inclusive or diversified economy. The gains were largely reactive rather than strategic—buoyed by remittances, import compression and fiscal restraint rather than innovation or competitiveness.

To transition from recovery to take-off, Nepal must move beyond short-term fixes. Reforms in public administration, industrial policy, export diversification, education and climate resilience are essential. Without them, the economy risks settling into a low-growth equilibrium marked by dependence, inequality and untapped potential.

At this time of a fiscal year, Nepal witnesses a kind of development frenzy hardly seen at other times. Earth-movers operate longer than usual and youths from different political parties and their myriad sister organizations sweat it out even in the rains, building motorable roads, canals, rural roads and what not with a sense of urgency and commitment that’s rarely seen in the life of this laid-back nation.

One wonders as to how long will it actually take for this country to take giant leaps on the path of (sustainable?) development if our energetic actors were to dedicate themselves to the cause of national development—and not individual development marked by ever-swelling bank accounts and personal as well as family fortunes, notable changes in what used to be a modest lifestyle, etc—like this round the year.
Those familiar with the ‘developments’ in Nepal know well that the development frenzy mentioned above lays bare an ugly face of development—that of a rigged development at play.

More often than not, the idea behind the frenzied work is to gobble up budget allocated for development/maintenance of infrastructure like roads, canals toward the fag end of a fiscal year when rains, floods and landslides wreak havoc throughout the country, making it clear that the hurried works won’t last long.There is every reason to suspect a food chain at work with monies small and big going to every actor involved in such projects based on their prominence. 

That the state agencies tasked with cleansing the system by launching a crackdown on such practices have hardly done so should be a matter of serious concern, especially for the taxpayer.

While irregularities in development works are a matter of serious concern, equally concerning is a very limited capacity of our state apparatuses to spend the budget earmarked for development. 

Data speak for themselves.
The government has not been able to spend even half of the development budget allocated for the fiscal year 2024-25, which comes to a close in mid-July. Of the Rs 3.52trn allotted for development works, the government has managed to spend a paltry Rs 1.64trn (46.59 percent) as of July 2 and one needs no expert to speculate about the quality of work conducted with the taxpayer’s hard-earned money. 

What’s more, the worrisome trend over the years is that an increasing share of the budget is going toward meeting administrative expenses like pay and perks for government employees, and repayment of foreign loans, at the expense of development. 

One more thing: Over the years in Nepal, development has become synonymous with road construction and maintenance, often undermining the fact that development brings destruction and displacement also.  

This calls for an increased focus on sustainable development, a serious and continuous development audit, and stringent action against big and small fish involved in corrupt ‘development practices’. 

Time to steer Nepal in that direction has indeed come.

The Nepali Army has completed five decades of service to the conservation of nature and environment across Nepal, marking a milestone in the country’s fight to protect its fragile biodiversity and natural heritage. Over the years, the Army has played a critical role in safeguarding national parks, wildlife, forests, and Himalayan ecosystems.

Nepal’s formal conservation journey took a major step in 1961 when the Army began rhino patrols in response to the declining population of the endangered one-horned rhinoceros, which had dropped from 800 to around 100. In 1973, Chitwan was declared the country’s first national park, and two years later, the government officially tasked the Nepali Army with park security.

Today, around 8,000 army personnel are deployed across 14 protected areas—including 12 national parks, one wildlife reserve, and one hunting reserve—through eight battalions, seven independent units, and one dedicated conservation training school.

Operating under National Parks and Wildlife Conservation Act (1973) and the ‘Permanent Operating Procedure’ endorsed by the Council of Ministers in 2010, the Army has worked closely with government bodies, local communities, and international partners to implement large-scale operations like ‘Operation Conservation’, now in its 11th edition, says the Nepali Army Spokesperson Brigadier General Raja Ram Basnet who also is the director of Directorate of National Park and Wildlife Reserve.

The Army’s protection duties include patrolling inside national parks and wildlife reserves, preventing encroachment, combating illegal poaching, and controlling deforestation. In support of nature conservation research, the Army provides human resources for wildlife censuses, offers essential information related to conservation efforts, and assists in the rehabilitation of wild species.

As part of its social services, the Army aims to raise awareness about environmental protection. These efforts include large-scale afforestation programs, repairing and renovating schools and shrines, supporting health centers in buffer zones and protected areas, providing medical care and water supply, and contributing to the construction of bridges and short stretches of road.

According to the Army website, in disaster management, the Army’s strategic locations and organizational structure enable it to respond swiftly to natural calamities and assist victims effectively. Furthermore, the Army contributes to human resource development by preparing and providing trained personnel for conservation education and training programs within buffer zones, national parks, and wildlife reserves.

Forests occupy 25.4 percent of the land area of Nepal, but deforestation is rampant. FAO estimates that Nepal lost about 2,640 sq km of forest cover between 2000 and 2005. In this bleak scenario, the protection of forests and their biodiversity is a great challenge to Nepal. The Army’s 12 battalions and independent companies protect forest areas measuring some 9,767 sq km.

This effort has yielded remarkable results. The number of Bengal tigers in Nepal increased from 121 in 2009 to 355 in 2022, making Nepal the first country to more than double its tiger population ahead of the 2022 global commitment timeline. Similarly, the one-horned rhino population, once near extinction, rose to 752 as of the 2021 census.

In 2019, the Army launched the ‘Clean Himalaya Campaign’ in coordination with various stakeholders to address rising pollution in the mountain regions. So far, the campaign has collected over 119 tons of waste, recovered 12 dead bodies, and managed four human skeletons from Sagarmatha and other peaks.

Despite budgetary constraints halting this year’s campaign, the Army carried out the ‘Exercise Shikhar Yatra’ to collect 500 kilograms of waste from Pangboche and Dingboche under the Sagarmatha National Park and raised awareness among locals and trekkers, says Basnet.

Deployed across the country’s diverse geography—from the +42°C heat of the Tarai to the -20°C cold of the Himalayas—the Army conducts daily patrols on foot, bicycles, vehicles, boats, and even elephants to prevent illegal activities like poaching and encroachment. “The Army also runs awareness campaigns in local communities and schools to ensure people are part of the solution.

Technological advancements such as drones, CCTV surveillance, Smart Eye, Vehicle Tracking, and the Real-Time Patrol Monitoring System have been incorporated to modernize conservation efforts,” says Basnet. However, the Army emphasizes the need for further technological upgrades to meet evolving challenges.

The Army notes that despite strong efforts, numerous challenges persist. These include climate change impacts, illegal wildlife trade, human-wildlife conflict, habitat encroachment, and limited access to cutting-edge technology. Nepal also faces external pressures, such as international demand for wildlife products and its role as a transit country in global trafficking networks.

Nonetheless, Nepal’s integrated conservation model—combining military deployment, community involvement, and governmental cooperation—has earned international acclaim. Nepal celebrated several years (2011, 2013, 2015, 2016, 2018, and 2019) as ‘Zero Poaching Years’. Multiple army units have received the Abraham Conservation Award, and Bardiya National Park won the prestigious Tx2 Award for tiger conservation.

According to Basnet, the Army’s 50-year conservation journey is not just about protection, but also about ensuring sustainable development and responsible tourism. The preservation of Nepal’s unique biodiversity contributes significantly to global climate goals, especially in light of the Paris Agreement’s Article 6 and 9 provisions for climate finance.

Moreover, the Himalayas, which are crucial to the water supply for nearly 1.5bn people, are under increasing threat due to global warming and tourism-related pollution. “The Army’s clean-up campaigns and high-altitude patrols aim to safeguard these ecosystems for future generations,” says the Army.

Lieutenant Colonel Gajendra Rawal, operation officer at the Directorate of National Park and Wildlife Reserve, says that the Army is continuously enhancing its efforts through School of Nature Conversation. The school, operated by the Army for about a decade now, trains security personnel in nature conservation practices, particularly for those deployed within the park. The school also functions as a joint conservation institution, involving park officials, conservation partners, and other stakeholders.  

There are 12 different regulations related to national parks and wildlife conservation. The government is currently working to consolidate them into a single umbrella regulation, which is expected to address the existing gaps and community concerns.

The Supreme Court (SC) took over four years to deliver its verdict on the controversial appointments of constitutional office bearers in 2020 and 2021. Lawyers had challenged the appointments, arguing that bypassing parliamentary hearings and using ordinances violated the constitution. However, the SC ultimately upheld the appointments, with a 3-2 majority in the five-member constitutional bench. Chief Justice Prakash Man Singh Raut and Justice Nakul Subedi dissented.

A total of 52 appointments—20 through ordinance and 32 without parliamentary hearings—were made in two batches. While ordinances may be justified in the absence of Parliament, appointments made while the legislature was functional had raised serious concerns.

The verdict has drawn public criticism, further eroding trust in the judiciary. Justice Sapana Pradhan Malla called for self-reflection over the prolonged delay, but the full bench remained unmoved.

Politically, the ruling is a victory for former Prime Minister KP Sharma Oli, who faced backlash for these appointments during a time of parliamentary dissolution and street protests. However, the verdict’s practical impact is minimal. Even if the SC had nullified the appointments, most office bearers have nearly completed their tenures. This suggests the judiciary may have sought to avoid a direct clash with the executive.

The ongoing Central Working Committee (CWC) meeting of the Nepali Congress (NC) is unlikely to bring major political shifts. Party President Sher Bahadur Deuba remains committed to the alliance with CPN-UML and shows little urgency in convening the long-demanded general convention.

Prime Minister Oli continues to reassure NC that he will transfer power to Deuba as agreed. Yet, doubts persist in diplomatic and political circles—will Oli honor his word, or will he extend his rule by aligning with the Maoists?

Despite internal calls for the CWC to meet more frequently, Deuba has delayed proceedings. While leaders criticize the government’s performance, few advocate exiting the coalition. Senior leader Shekhar Koirala, however, has demanded an explanation for the UML alliance.

NC leaders are also concerned about the 2027 election, mainly about the electoral alliance. While grassroots members are against forging any electoral alliance with the Maoists, top leaders view it as a strategic necessity to counter UML. The big question remains: Will NC or UML partner with the Maoists, or will the elections proceed without alliances?

Also, with Deuba’s retirement approaching, succession battles are intensifying inside the NC. The party’s internal dynamics, and Deuba’s eventual successor are under close scrutiny. 

Former President Bidya Devi Bhandari has rejoined CPN-UML, vowing to uphold the ideology of her late husband, Madan Bhandari, who advocated for Nepal’s communists to adapt to multiparty democracy.  Senior leaders are divided on this issue. Some argue that Bhandari’s re-entry is justified, while others say that it is inappropriate for a former head of state to rejoin party politics. Another question is: Will she become a prime minister in the future? If UML emerges as the largest party and she secures the leadership, the possibility cannot be ruled out. To avoid the criticisms, Bhandari has asked the Ministry of Home Affairs not to provide her any facilities except the security personnel.

The Rastriya Swatantra Party (RSP), once a rising force, now faces turbulence. Chairperson Rabi Lamichhane remains embroiled in a cooperative fraud case, leaving the party scrambling for a leader. While second-rung leaders vie for prominence, they have managed to keep disputes under wraps. The party continues to disrupt Parliament, demanding Home Minister Ramesh Lekhak’s resignation over his alleged involvement in the visit visa scam, but its momentum is waning.

A clash between lawmakers and bureaucrats has erupted over the Civil Service Act’s cooling-off period provision. Lawmakers rejected the clause, citing concerns over politically motivated appointments undermining governance. However, bureaucrats reinserted it into the draft, an audacious move that has drawn Speaker Dev Raj Ghimire’s scrutiny. An investigative panel may be formed, with the National Assembly yet to weigh in.

CPN (Unified Socialist) faces turmoil after corruption charges were filed against Chairman Madhav Kumar Nepal. Party leaders, including Ram Kumar Bhakti, openly demand his resignation, arguing his continued leadership tarnishes the party’s image. Yet, Nepal clings to power—an unusual move amid legal troubles.

Inside Parliament, critical bills, including education and police reforms, are being prioritized. The government faces pressure to pass the education bill swiftly, following protests by teachers earlier this year.