In addition to highlighting the long-simmering generational resentment in the nation, the GenZ protests in Sept 2025 brought about one of the worst economic shocks in Nepal’s recent history. What started as youth-led protests against political stagnation, unemployment, and corruption swiftly descended into violence, resulting in dozens of fatalities, thousands of injuries, and an enormous financial loss. The actual question now is whether Nepal can withstand these shocks without spiralling into more severe cycles of instability. The protests’ financial toll is already apparent: direct damages totalling billions of rupees, a decline in investor confidence, a contraction in essential industries, and an increase in unemployment. These losses, if ignored, will worsen the very circumstances that pushed young Nepalis onto the streets, raising the possibility of future unrest.
The most apparent and agonizing toll is the human one. Over two thousand people were injured during the protests, and at least seventy-four people were killed nationwide, including protesters and security personnel. Public trust in the state’s ability to maintain law and order was broken and prison breakouts contributed to the growing sense of lawlessness. The less obvious but no less terrible tale of economic devastation, however, is hidden behind these headlines. According to estimates from economists, the collateral damage caused by the protests is approximately Rs 3trn, which is nearly half of the nation’s GDP and equal to the government’s budget for almost one and a half fiscal years. The foundation of Nepal’s economy, the tourism industry, has been especially severely affected. According to tourism officials, the industry lost approximately Rs 25bn during and immediately following the protests, as thousands of cancellations destroyed what was supposed to be a prosperous season. With reported losses exceeding Rs 25bn and damage exceeding Rs 8bn at the Hilton in Kathmandu alone, the hotel industry has been disproportionately affected. These numbers are more than just statistics; they reflect the closure of businesses, unpaid workers, and a decline in Nepal’s reputation as a safe and secure travel destination abroad. When order is restored, the effects won’t go away; damage to a tourism industry's reputation may persist for years, discouraging subsequent tourism and investment in associated infrastructure.
The entire private sector has also suffered greatly. An estimated 15,000 jobs were directly impacted, and businesses reported losses of about Rs 80bn. These new job losses run the risk of escalating the cycle of economic despair in a nation already beset by pervasive underemployment and a significant reliance on foreign migration for employment. In addition to undermining household incomes, unemployment increases outbound migration and strengthens Nepal's reliance on remittances from abroad. Due to business closures or reductions during the unrest, nearly 10,000 Nepalis reportedly lost their jobs within a short period. This weakens the very demographic advantage Nepal should use for development, exacerbating an already precarious situation where the young, skilled labour force sees greater prospects abroad than at home.
The losses extended beyond small businesses and the tourism sector. Due to increased consumer demand, the automobile industry, which has been one of the most dynamic in recent years, sustained damages totalling about Rs 15bn. Along with interrupted imports and supply chains, the destruction of showrooms and warehouses runs the risk of slowing down a market that was previously growing. Consumer confidence and purchasing power might take some time to recover, even with the reconstruction of physical infrastructure, particularly as inflationary pressures increase and household incomes remain stagnant. This illustrates how instability undermines long-term growth prospects: years of gradual progress in industries that reflect the burgeoning middle-class economy can be reversed by a single wave of violence.
The cumulative effect of these losses has negatively impacted the macroeconomic outlook for Nepal. The economy was expected to grow by 3.5 to 4 percent this fiscal year, but growth forecasts have since been drastically reduced; some economists now predict growth of less than one percent. Others note that if reconstruction is postponed or funded carelessly, Nepal might experience complete contraction. According to one estimate, the protests caused losses of $22.5bn, or nearly half of Nepal’s GDP. As a result, the GenZ protests would rank among the most severe economic shocks to South Asia during a period of peace in recent memory, in addition to being a disruptive episode. This magnitude of loss runs the risk of igniting a fiscal and monetary crisis for a nation still recuperating from the pandemic and having trouble managing its debt.
The state is already feeling the financial strain. The government has been forced to reallocate funds for increased security spending, emergency relief, and compensation for the families of the victims. The fiscal deficit has widened as a result of the collapse of tourism and commerce revenues. Nepal may have to borrow more money as a result of declining revenues and growing debt. However, borrowing now runs the risk of trapping the nation in a debt cycle, particularly if grants and concessional loans from outside partners are not forthcoming. The burden will only get worse if borrowing costs increase, especially if credit rating agencies reduce Nepal’s risk profile in reaction to political and economic unrest. A declining rupee and growing import prices could cause inflationary pressures that further reduce real incomes and exacerbate public annoyance.
A new generation of Nepalis has taken to the streets to vent their frustration because they are better educated, more globally connected, and more conscious of the shortcomings of the government. Disillusionment will increase if their complaints are only addressed through repression and short-term fixes rather than structural changes. That might undermine democratic stability by opening the door for frequent demonstrations or more extreme forms of mobilisation. Nepal runs the risk of becoming caught in a vicious cycle where protests erode the economy further, which in turn leads to more protests. Economic despair and political alienation are a volatile combination.
Consequently, Nepal cannot meet the challenge on its own. Being a landlocked nation sandwiched between two powerful countries, Nepal’s instability will unavoidably impact its neighbours, and it needs outside assistance to recover. India, Nepal’s closest neighbour and biggest trading partner, has a special obligation to provide concessional credit lines for reconstruction and investment in industries that create jobs. Targeted assistance in border areas, primarily through cross-border trade hubs and renewable energy projects, may be able to absorb some of the young people without jobs and lessen the pressures of migration. In order to guarantee the transparent use of reconstruction funds, India can simultaneously offer technical expertise in auditing and public finance.
Beijing must put community-sensitive projects that meet local needs ahead of purely strategic objectives if it hopes to be regarded as a reliable development partner. Coordination with Nepali stakeholders, grants rather than high-interest loans, and transparent funding will be essential. The time demands that multilateral organisations like the World Bank and Asian Development Bank reevaluate their priorities, allocating funds not only to infrastructure but also to rural development, youth employment, and governance reforms. Through direct investments in healthcare and education, development bonds backed by remittances, or emergency compensation funds for impacted families, Western donors and Nepal’s diaspora communities can also make a significant contribution.
Nepal’s recent history has taught us that crises rarely come to an end with a single incident. The monarchy was overthrown by the People's Movement of 2006, but federalism and ethnic grievances remained unresolved. Although it alienated important groups, the 2015 Constitution established a new order. The GenZ protests follow this pattern: if youth grievances are not addressed, today’s instability will only serve as the catalyst for tomorrow’s upheaval. Now, structural reform is required in addition to reconstruction. The bare minimum of stability requires the transparent rebuilding of damaged infrastructure, a youth-focused national employment mission, institutional reforms to fight corruption, and sincere communication with younger generations and civil society.
If these economic wounds are allowed to worsen, there is a risk that they will exacerbate disenchantment, accelerate migration, erode the fiscal system, and create the conditions for further upheavals. Nepal and its neighbours, who would unavoidably be affected, cannot afford such a course. It is now the duty of Nepali leaders and outside partners to take note of the possibility to not only restore what has been destroyed but also to establish the framework for a more resilient, inclusive, and stable order. The GenZ protests might be seen as a sign of long-term decline rather than a turning point towards reform in the absence of such a concerted and systemic response.
The author is a PhD Candidate at the School of International Studies, Jawaharlal Nehru University, New Delhi
