Money is cheap in Nepal. Businesses still aren’t investing
Summary
Nepal has plenty of liquidity and record-low interest rates, but private-sector investment remains weak and credit growth is far below target. Inflation has climbed to 5.96 percent, while flood damage and low business confidence are adding to the economic drag.
Key Points
- Nepal’s banking system is flush with liquidity and interest rates are at decade lows, yet private-sector credit growth has stayed around 6 percent a year instead of the central bank’s 12 percent target.
- Economists say weak business confidence, delayed consultations by the government and central bank, and cautious investment sentiment are keeping money from flowing into productive sectors.
- Inflation rose sharply to 5.96 percent in the first month of the fiscal year, with food prices and supply disruptions contributing to rising household pressure.
- The Bhotekoshi floods caused further damage, while reconstruction could add economic activity if recovery efforts move ahead.
