Weekly Economic Bulletin: 18th December 2022 to 24th December 2022

FDI down by more than 50% during the first four months of the current fiscal year

The foreign direct investment (FDI) in Nepal continue to slide. New FDI approvals were granted for 95 projects with a total investment commitment of Rs. 11.60 Billion which is 53.22 % lower year on year. Slowdown in the global economy and economic slump in China, the major contributor to Nepal’s FDI for some years now, has been identified as the primary reason for the decrease in FDI commitment. However, China still remains Nepal’s top FDI source accounting for almost 2/3rd of the total commitment received.?

The latest data released for the month of Mangsir 2079 are not encouraging either. 16 new projects with a total investment of Rs. 849 Million (all small scale projects) have been approved during the month.

Remittance inflows jump by record 20%

During the first four months of the current financial year, the remittance inflows have jumped by a record 20% in Rupee terms. Thanks to the weakening of Nepali Rupees. In dollar terms too, the growth has been around 10.8%.?

And the increase in remittance and a decrease in imports have certainly added to the foreign exchange reserve of the country. A silver lining to the ailing economy??

More people leaving the country for employment?

On the one hand, the remittance inflow is growing and on the other, more people are moving out of the country for employment. During the first five months of the current fiscal year, 347,340?Nepalis have already left the country and it is estimated that the total will soon reach a million by the end of the current fiscal year.?

This speaks in volume regarding the outlook of common Nepalis regarding the outcome of the general elections and fake promises of the political parties.?

Online payments down by nearly Rs. 1 Trillion!

Amidst expectations of a spending surge during a festive season followed by general elections and the FIFA World Cup Qatar 2022 , the online payments have dropped sharply by 20% from Rs. 4.93 trillion last year to Rs. 3.94 trillion for the month of Kartik (mid October to mid November).?

What does this indicate? Is cash still the king? Or the imports ban has hurt the economy by reducing spending or is there more?

Nepal ranks very low in digital entrepreneurship and innovation

Nepal ranks 104th in the Asian Development Bank (ADB) Bank’s ranking of 113 economies in digital environment and support systems for entrepreneurs. And it ranks further lower at 111th out of 132 countries in the Global Innovation Index 2022 published by the World Intellectual Property Organization – WIPO . So are we doing so bad in terms of digital entrepreneurship and innovation? While the mushrooming start up award shows definitely tell a different story, where are we actually lacking??

JICA makes first private sector investment in Nepal

Japan International Cooperation Agency (JICA) Agency signed a USD 10 Million investment agreement with Dolma Impact Fund , a private equity fund focused in making impact investment in Nepal. Dolma now manages a fund corpus of USD 71.96 Million which it has secured from various development finance institutions. Dolma has recently invested in Sastodeal , Upaya City Cargo, Foodmandu and is expected to utilize the new funds primarily to invest in healthcare, renewable energy and IT & digital companies.?

Here is a excerpt from JICA’s outlook on Nepal:

“Although Nepal experienced a temporary economic downturn due to the earthquake in 2015, the economy has revived since then and the country is now expected to graduate from the Least Developed Countries (LDC) category by 2026. On the other hand, Nepal is facing the challenge of a hollowing out of industry caused by the increased number of migrant workers, which in turn is due to the lack of promising domestic industries and job opportunities in Nepal. Therefore, the fosterage of promising industries such as healthcare and the IT/digital sector is urgently needed in Nepal. In some areas, however, Nepal has a natural advantage, being blessed with abundant water resources and an economically viable hydropower generation potential estimated at around 42,000 MW. Hence, Nepal is expected to expand its renewable generation capacity to contribute to the reduction of greenhouse gas emissions in South Asia.”

The investment from DFIs in Nepal focused PE is certainly a positive message to other FDI investors but will this be enough to convince more investors to bet on Nepal's future? Do let us know in the comments below. And if you found it insightful, please share and help us increase our reach.?

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