Nepal Weekly Economic Bulletin: 23 April 2023 to 30 April 2023

This economic bulletin highlights various issues and developments in Nepal's economy over the last week. The country is likely to face a number of economic challenges amidst political instability. A lack of investment in critical sectors is hindering its economic growth. However, there are also positive developments. Read our weekly updates of the major headline from Nepal's business and economy with our own analysis and comments.

Nepal's Ride-Hailing Companies Operating Illegally, says the Government Audit Report

A recent audit report by the Auditor General of Nepal has made some interesting observations about the ride-hailing companies in Nepal. The report has alleged that these companies are operating without necessary licenses and operating illegally, and they have not been registered with the Department of Transport Management (DoTM) as required by law. The audit report recommends that the government take action to ensure that ride-hailing companies comply with the law.?

The Motor Vehicles and Transportation Act, 2049 prohibits any private motor vehicles to be used as public transportation. It has also raised concerns over the operation of services by offshore companies like InDrive without registering in Nepal.?The report further observed that the government has failed to address the issues regarding the ride hailing companies. Looking at the present scenario, the government itself is not sure whether to allow these companies to operate or not despite being aware of the issue for a long time.?

Nepal's Post-Covid Economic Recovery is Stumbling

Nepal's economic growth had rebounded in the last fiscal year, but recent data shows a decline in key indicators such as remittance inflows, tax revenue, and exports. This is attributed to various factors such as political instability and a lack of investment in critical sectors.

The unstable political environment in Nepal has hindered the government's ability to implement effective policies and initiatives to stimulate economic growth. Nepal's economy has been declining for some time, despite efforts by the previous and current government to revive it. The government is struggling to generate enough revenue to cover its expenses and risks falling into a debt trap by taking out large loans with conditions. There are concerns that Nepal could be greylisted by the FATF, a global anti-money laundering watchdog, which would further harm the country's growth prospects.

Inflation, which is increasing by 8% on a yearly basis, has badly affected the people’ livelihood. The cost of expenses for election and again re-election has added more economic burden amid inflection. Pragmatic measures are necessary to revive Nepal's struggling economy before it deteriorates further. The government should prioritize accepting grants rather than loans, to avoid falling into a debt trap. There is the need for urgent action to address Nepal's economic challenges before they become more severe.

Nepal Airlines Plans to Launch Direct Flights to Australia Four Years After Signing Deal

Nepal Airlines is preparing to operate direct flights to Australia four years after signing an air service agreement. The airline is in the process of obtaining regulatory approvals from the Australian authorities and is expected to launch flights once the approvals are granted. The move is expected to benefit Nepali students leaving for Australia and also enhance tourism between the two countries. The airline has faced financial and operational challenges in the past, but is working to overcome them and expand its international reach. Overall, the launch of direct flights to Australia can have positive economic impacts for Nepal, including increased trade, tourism, and remittance flows.

Dabur Nepal Gets Nod from Investment Board to Reinvest its Profits

The Investment Board Nepal (IBN) has signed a memorandum of understanding (MoU) with Dabur Nepal for the reinvestment of profits earned by the company. Dabur Nepal is a subsidiary of the Indian consumer goods company Dabur India. The agreement was signed under the government's policy of encouraging companies to reinvest their profits in Nepal. The agreement aims to create a conducive environment for investment and economic growth in Nepal by encouraging companies to reinvest their profits in the country. Dabur Nepal has been operating in Nepal for over 25 years and has been one of the largest taxpayers in the country among exporters.?There will be an additional investment of Rs 9.68 billion according to the Capacity Enhancement and Diversification Project submitted by Dabur Nepal.?The Capacity Enhancement and Diversification Project presented by Dabur Nepal is expected to bring significant benefits to Nepal's economy, including job creation, increased manufacturing capacity, and diversification of products.?

Unpaid Bills by Government May Delay Crucial Projects?

The Government is evidently struggling with finances and is now unable to meet its payment obligations. One such evident issue is of the Sunkoshi Marin Diversion Multipurpose Project. The project involves diverting water from the Sunkoshi River and directing it into the Bagmati River to irrigate 122,000 hectares of farmland in Rautahat, Dhanusha, Mahottari, Sarlahi and Bara districts in the southern plains.?China Overseas Engineering Co., the construction company responsible for constructing the project has reportedly not received payments of over Rs. 700 million from the government.?Delay in the payment could let not only in the delay of the project but also in the addition of expenses because the contractor is entitled to claim a monthly interest equivalent to 5% of the amount if the payment is not made within 48 days of the bill's submission.

That's all for the week. You may also want to read other regular updates and insights from Nepal's economy and business here in our website. Help your professional network become more aware about Nepal's economy by sharing/reposting this.