KATHMANDU: Welcome to Nepal News’ Evening Economic Brief—your go-to source on key financial updates in Nepal. Stay informed with concise insights on market trends, economic indicators, and policy shifts. Here are today’s top economic news highlights.
IMF Mission to Visit Nepal for Sixth Review of Extended Credit Facility: An IMF mission team will visit Nepal from Jestha 11 for two weeks to conduct the sixth review of the Extended Credit Facility (ECF) program. The visit follows the disbursement of the fifth tranche and aims to assess progress on reforms pledged by Nepal. The mission will meet key officials including the Finance Minister and NRB Governor. Nepal secured the $398.8 million ECF in 2022 to support economic stability, with five tranches already disbursed. The IMF acknowledged past progress despite political instability and natural disasters but highlighted ongoing risks and urged improvements in fiscal discipline, governance, and financial sector regulation.
Bangladeshi Firm Selected to Audit Loan Portfolios of Nepal’s Top 10 Commercial Banks: Bangladesh-based Howladar Yunus & Co. has been technically selected to audit the loan portfolios of Nepal’s 10 largest commercial banks. Nepal Rastra Bank (NRB) has invited the firm to submit its financial proposal by Jestha 25. The final contract will be awarded only if the company also qualifies financially. Earlier, Indian firm KPMG was selected but later disqualified due to financial proposal issues, delaying the review process. The audit, a requirement under Nepal’s Extended Credit Facility agreement with the IMF, was initially scheduled for October last year. The IMF is set to review the program’s sixth installment soon.
Govt Tightens Hydropower IPO Rules: Public Shares Only After Power Generation Begins: To curb financial misconduct by hydropower promoters, the government has enforced a new policy allowing public share issuance only after project completion and electricity generation. This move follows recommendations from the High-Level Economic Reform Commission led by former Finance Secretary Rameshore Prasad Khanal. The “Economic Reform Implementation Action Plan 2082” tasks the Finance and Energy Ministries with execution, while the PM’s Office will oversee coordination. The policy aims to stop cost inflation and misuse of bank loans during project construction, and to end the trend of promoters profiting from IPOs before actual operations begin, ensuring greater transparency and accountability in the sector.
Beni-Kaligandaki Hydropower Project Moves Forward Amid Local Opposition and Investment Push: The 50.5 MW Beni Kaligandaki Hydropower Project in Jaljala of Myagdi and Parbat has advanced, with the Department of Electricity Development inviting investment under the BOOT model. A 30-day public notice for Expressions of Interest was issued on May 10. Locals in Jaljala welcome the project, seeing it as a source of jobs and economic growth. However, Beni residents and political leaders strongly oppose it, citing threats to the religious and cultural importance of the Kaligandaki River. Critics warn that diverting water could disrupt rituals and local life, urging the government to halt construction plans.
Nepal Insurance Authority Launches Monthly Report ‘Beema Pratibimba’ with Detailed Sector Data: Marking its 57th anniversary, the Nepal Insurance Authority has launched a monthly publication, Beema Pratibimba, featuring comprehensive insurance sector statistics. Inspired by Nepal Rastra Bank’s widely-referenced “Vartamane” economic report, this new initiative aims to regularly deliver integrated and refined data on the insurance industry. The first edition, based on data from Chaitra, includes detailed insights and macro-level analysis to support evidence-based policymaking. According to Authority spokesperson Sushildev Subedi, this publication improves upon past fragmented data releases. Though the inaugural issue faced delays, future editions will follow a regular schedule and aid the government in shaping insurance policies during the budgeting process.
Small Borrowers Hit Hard by Economic Slowdown, Loan Protection Data Reveals Alarming Trends: Nepal’s ongoing economic contraction has severely impacted small borrowers, with over 238,000 loan recipients dropping from credit protection in the past two years, according to the Deposit and Credit Guarantee Fund. The number fell from 1.75 million in FY 2078/79 to 1.51 million in FY 2080/81. While fewer people are taking loans, the average loan size per borrower has surged by 30%. Experts suspect “evergreening” practices—banks issuing new loans to repay old ones—despite Nepal Rastra Bank restrictions. Though revenue from guarantee fees rose by 14%, so did default claims, especially in microfinance. Experts warn of hidden risks even in large commercial banks.
Government Halts New Major Road Projects in Hill Regions Under New Policy: The government has adopted a strict policy to stop launching new large road projects in Nepal’s hill regions. This provision is part of the action plan approved by the Cabinet to implement the 2081 High-Level Economic Reform Commission’s recommendations. Future road projects will now be prioritized based on strategic utility, with the policy taking effect from the upcoming fiscal year. The plan also emphasizes productivity-focused infrastructure use and bans budget allocation for unprepared projects. Additionally, a freeze on staff transfers during project periods is expected to cause administrative delays and complicate the development process in the affected regions.
Nepal Opens Doors to Outward FDI, Aiming to Boost Global Presence:Nepal’s government has liberalized its policy on outward foreign direct investment (FDI), allowing domestic companies to invest abroad. This move aims to enhance Nepal’s global economic integration and competitiveness. The revised policy permits investments up to USD 1 million per company annually, subject to regulatory approvals. The initiative is expected to help Nepali firms access new markets, acquire advanced technologies, and strengthen supply chains. However, challenges such as foreign exchange constraints, regulatory hurdles, and limited institutional capacity may impact the policy’s effectiveness. Stakeholders emphasize the need for clear guidelines, streamlined procedures, and capacity building to ensure successful implementation and to maximize the benefits of outward FDI for Nepal’s economy.
Nepal’s Banking System Faces Liquidity Surplus Amid Weak Credit Demand: Nepal’s banking system is grappling with a growing liquidity surplus, as total deposits from development banks and finance companies have reached Rs. 6.892 trillion, while credit disbursement stands at only Rs. 5.529 trillion. Despite falling interest rates—now averaging around 8.22% for commercial banks—credit demand remains sluggish due to a weak internal economy. Banks currently hold nearly Rs. 674 billion in investable funds, with over Rs. 363 billion parked at Nepal Rastra Bank (NRB) through short-term instruments like the Standing Deposit Facility (SDF). Much of the new lending has gone to imports and share-backed loans, not to productive sectors like industry or agriculture. Economists warn that this trend fails to generate employment or stimulate growth. While remittance inflows continue to boost deposits, the inability to channel these funds into productive investments poses risks to financial stability. Bankers expect credit demand to rise if business confidence and economic activity improve.
