It is also anticipated that the success of political change and the assurance of sustainable sound economic management could accelerate economic reform. On the downside, continued uncertainty is expected to discourage investors.
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The World Bank has projected that Nepal's growth will slow from 4.6 percent in fiscal year 2025 to 2.1 percent in fiscal year 2026. Reflecting the impact of the Bhadra protests and subsequent political instability, the bank's latest economic report states that the economic growth rate will slow down. In fiscal year 2027, the economic growth rate is estimated to reach 4.7 percent, due to progress in reconstruction efforts.
According to the Nepal Development Update Report released on Thursday, the services sector is expected to be the most affected . However, the statement said that this projection is still uncertain .
‘To restore business confidence and accelerate the recovery, the government has unveiled an integrated business recovery plan, under which it has managed facilities including grants, tax exemptions and operational support,’ Finance Minister Rameshwor Prasad Khanal said, ‘Public resources have been given priority for infrastructure reconstruction and election preparations . In addition, a reconstruction fund has been set up to reconstruct damaged public and private assets . With these steps, the government of Nepal aims to restore private sector activities while maintaining a strong economic foundation.’
The report emphasizes the need to strengthen public investment management for sustainable economic growth . In fiscal year 2024, the total capital expenditure of the federal, provincial and local governments was 7.9 percent of gross domestic product. This is far below the investment required to meet Nepal's infrastructure needs. Nepal's infrastructure needs require an investment of 10 to 15 percent of gross domestic product.
'Increasing public investment is crucial for improving Nepal's economic growth rate, creating jobs and promoting the prosperity of all Nepalis,' said David Sislen, World Bank Division Director for Maldives, Nepal and Sri Lanka. 'This requires implementing some key actions. This includes strengthening project construction and budgeting, streamlining the land acquisition and logging process, making financial management more effective, and amending the public procurement law and regulations.'
The Nepal Development Update is published twice a year. For a long time, this report has been providing in-depth study and analysis of economic development.
