Two captains, no rudder: The structural strain of Nepal’s economic policy drift
Summary
Nepal’s economy is being buoyed by record remittances, strong foreign exchange reserves and rising electricity exports, but growth remains well below target and the trade deficit keeps widening. A split between the Prime Minister’s Office and the Finance Ministry is deepening concerns over policy coordination as the country pushes central bank reform.
Key Points
- Record remittances, reserves and electricity exports are cushioning Nepal’s external position, but they have not solved its weak domestic growth or widening trade deficit.
- Economic policymaking is increasingly fragmented, with Prime Minister Balen Shah and Finance Minister Swarnim Wagle running separate outreach tracks to the private sector.
- The lack of coordination creates uncertainty for businesses and bureaucrats, raising the cost of investment even when policy substance may be sound.
- A proposed amendment to the Nepal Rastra Bank Act aims to strengthen central bank independence, but its success will depend on clearer institutional boundaries and execution.
