KATHMANDU: The Economic Digest provides a concise yet comprehensive overview of significant business happenings in Nepal, presented in easily digestible summaries. This week’s economic developments paint a mixed but cautiously optimistic picture for Nepal’s market and broader economy. Despite a 2.01% drop in the share market and declines in gold and silver prices, the market has still surpassed last year’s peak, indicating underlying resilience.
Market Trends: A Mixed Bag
The share market experienced a notable decline this week, dropping by 2.01% and shedding 60 points. The benchmark index fell from 2,982 to 2,922, despite reaching a high of 3,002 earlier in the week. This high was reminiscent of last year’s peak, which was briefly touched on August 15, 2022. Over the week, three trading days saw losses, while two days recorded gains, reflecting the market’s volatility.
Precious Metals: Gold and Silver Prices Decline
In the realm of precious metals, gold prices fell by Rs 500 per tola on Friday, bringing the rate down to Rs 193,100. This decline follows a drop of Rs 1,300 over two days, with silver prices also dipping by Rs 35 per tola. The rising domestic gold prices have significantly reduced imports, impacting revenue streams for the country.
Regulatory Developments: A Push for Innovation
In a bid to foster financial innovation, the Nepal Rastra Bank (NRB) has introduced a regulatory sandbox model. This framework allows institutions to pilot new electronic financial products, with public consultation currently underway. The initiative aims to encourage the development of digital finance applications and software, marking a significant step toward modernization in Nepal’s financial sector.
Rising Loan Interest Rates
As Nepal’s per-capita national income improves, borrowing costs from international institutions have increased. The Ministry of Finance reports that loan rates from entities such as the World Bank and ADB have risen, reflecting adjustments based on income levels and repayment capacities. This trend indicates a growing economy but also poses challenges for borrowers.
Policy Shifts: Simplifying Insurance and Budget Discipline
Key policy shifts are underway, including calls for simpler insurance language to build public trust. Advocates are urging insurance companies to issue policy documents in clear Nepali, ensuring that all terms are easily understandable. Additionally, the government plans to remove the mandatory life insurance requirement for migrant workers, easing financial burdens on this demographic.
In a controversial move, the Ministry of Finance has begun drafting a budget discipline bill without prior cabinet approval. This has raised eyebrows among stakeholders, as the task force pursues both drafting and cabinet approval simultaneously.
Export Growth and Infrastructure Investments
Nepal has achieved record yarn exports worth Rs 14.39 billion in the fiscal year 2024/25, marking a 19.85% increase from the previous year. This growth highlights the rising demand for high-value Nepalese yarn in international markets.
Moreover, the government has approved nearly Rs 49 billion in project loans for infrastructure development, including a significant Japanese grant for highway repairs. These investments are crucial for enhancing the country’s infrastructure and supporting economic growth.
Agricultural Challenges and Local Protests
Despite positive developments, challenges persist. Paddy planting in Madhesh Province has sharply declined, with only 51% of fields planted compared to 90% last year, primarily due to unfavorable weather conditions. Additionally, local protests over coal imports at the Sirsiya Dry Port continue, as residents express concerns over pollution.
Revitalization Efforts and New Initiatives
Efforts are underway to revive the long-neglected Gajendra Narayan Singh Industrial Estate, with local leaders collaborating to transform it into an industrial hub. The estate management is offering affordable land leases and essential services to attract businesses.
In the telecommunications sector, Ncell has launched a special monsoon offer for businesses, providing cost savings for postpaid, SME, and corporate users. This initiative aims to support businesses throughout the year.
Conclusion: A Balancing Act
Overall, the economic landscape in Nepal reflects an ongoing balancing act between growth, regulation, and social concerns. While challenges remain, the resilience shown in the market and the proactive steps taken by the government and financial institutions signal a cautiously optimistic outlook for the future. As Nepal navigates these complexities, the focus will be on fostering innovation, simplifying regulations, and ensuring sustainable growth for all sectors of the economy.
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