Nepal has faced a decade of relentless challenges, with the country experiencing a series of crises that have tested its resilience. The 2015 earthquake left deep scars on the economy, and the situation was further exacerbated by a prolonged economic blockade from India. As Nepal struggled to recover, the global pandemic struck in 2019, adding another layer of difficulty.
Since then, the country has been repeatedly hit by rain-induced disasters, each year bringing new devastation. The energy sector, which had shown promising progress, has suffered setbacks due to floods and landslides. In June 2023, continuous rains damaged over two dozen hydroelectric projects, along with roads, bridges, and other critical infrastructure. Then, in September 2024, heavy rainfall caused widespread destruction, claiming over 250 lives and resulting in losses of Rs46.68 billion. A World Bank report highlighted that such natural disasters last year cost Nepal approximately 0.8 percent of its GDP.
This year has not brought relief. Earlier this month, several provinces—including Koshi, Madhesh, and Bagmati—experienced severe floods and landslides. Adding to the turmoil, political unrest last month disrupted efforts to create an investment-friendly environment. What started as youth-led protests escalated quickly, leading to the destruction of key public infrastructures such as Singhadurbar, the Supreme Court, and Parliament buildings. Businesses were also targeted, creating fear within the business community.
On Tuesday, the World Bank revised Nepal’s projected economic growth for the current fiscal year down to just 2.1 percent, with potential for negative growth between 1.5 and 2.6 percent. This is a significant drop from the April projection of 5.4 percent. Notably, the latest figure does not even account for the damage caused by the recent October 3-4 rainfall. These recurring shocks highlight the urgent need for disaster-resilient infrastructure in one of the world’s most climate-vulnerable nations.
The Sushila Karki-led interim government has a clear mandate: to hold parliamentary elections in March and transfer power to an elected government. However, it must also focus on restoring business confidence. A business-as-usual approach is insufficient for an economy reeling from consecutive crises. Nepal needs investment, and the government must take credible steps to assure both domestic and foreign investors. This includes providing convincing statements, ensuring policy stability, and guaranteeing that investments and properties will be protected, regardless of political changes.
The World Bank’s latest report also suggests that recent political shifts could present an opportunity for reforms, especially in governance—a key demand of the Gen Z-led movement. With seasoned economist Rameshore Khanal at the helm of the Finance Ministry, the government can address many concerns of the business community. His priorities should include reducing bureaucratic hurdles and fostering a business-friendly environment, two long-standing demands of the private sector.
Finally, creating an environment conducive to holding timely elections could help restore public trust and build investor confidence. However, the business community, spooked by recent incidents of arson and looting, will not be easily convinced. Nor will the international community, which are vital engines of economic growth. This is why sustained efforts are needed to gain their confidence. The new government must ensure that there will be no future destruction of businesses and properties, and swiftly punish those responsible for acts of vandalism. Lawlessness and business confidence cannot coexist.
