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Nepal has been ‘on the verge of a breakthrough’ for so long that the phrase stopped meaning anything. Every government since the 1990s has promised transformation. Every budget speech has invoked the nation’s rivers, its mountains, its ‘untapped potential’. And then, reliably, the coalition collapses, the reform stalls, and the file goes back to sleep on someone's desk.

So when Finance Minister Swarnim Wagle walked into office and repealed 15 obsolete laws on his very first day, you could be forgiven for wondering if this time was genuinely different. That is a real thing that happened. Not a committee recommendation, not a white paper for further study. Actual laws, scrapped, on day one.

That single act told the private sector something no budget speech could: the government understands that laws written decades ago are not neutral. They are friction. They are the price a businessperson pays just to exist. Getting rid of them is not a reform. It is a confession that the state had been in the way.

The broader commitment paper the government has since released is ambitious to the point of being uncomfortable. Double per capita income to $3,000. Expand GDP from Rs 61trn to Rs 100trn. Do it within five years. On paper, the National Planning Commission already projected Rs 89trn in three years under ordinary conditions. So the stretch is real, but it is not delusional. The gap between Rs 89trn and Rs 100trn is a policy gap, not a physics problem.

What makes this round of ambition feel different is the specific texture of the proposals, not their scale.

Take the ten-year guarantee on tax rates and investment conditions. Foreign investors who have considered Nepal and walked away were not always frightened by the tax rate itself. They were frightened by the uncertainty. A rate that changes with every cabinet shuffle is worse than a high rate, because you cannot price uncertainty into a business model. You can price a high tax. You cannot price a government that might change the rules before your factory is even built. By pledging stability for a decade, the government is essentially selling something it has never successfully sold before: predictability.

Then there is the electricity target. Thirty thousand megawatts in a decade is, frankly, a staggering number. Nepal’s entire installed capacity today is somewhere around 3,000 MW, and actual generation consistently falls short even of that. But the direction matters as much as the number. Nepal sitting on one of the world's richest hydropower reserves while importing electricity from India is one of those economic ironies that stops being funny after a few decades. The ‘Green Battery of South Asia’ framing is not new. What is new is a government that has the parliamentary majority to actually push through the land acquisition, transmission corridor, and cross-border power trade agreements that have historically died in committee.

On education, the proposal to introduce AI and coding into school curricula and aim for 1.5m digital jobs is the right instinct, but it needs honest framing. A country that is currently exporting its most educated people to Gulf construction sites and Malaysian factories cannot shortcut its way to a digital economy in five years. The pipeline is longer than that. What the government can do in five years is stop actively destroying its universities. 

Banning party-affiliated unions and political activity in educational institutions, as the commitment paper proposes, would be a start. Nepali academia has been so thoroughly politicized that even basic administrative decisions, such as faculty appointments and exam schedules, have become bargaining chips in union negotiations. That is not hyperbole. Ask any student who has lost an academic semester to a strike called for reasons entirely unrelated to education.

The FATF situation deserves more public attention than it gets. Nepal is on a greylisting watch. That is not a bureaucratic inconvenience. It means Nepali banks face enhanced scrutiny in international transactions, which in practice means higher costs and slower processing for remittances, trade finance, and investment flows. The country receives remittances equivalent to roughly a quarter of its GDP. Any friction in that channel is a direct tax on working-class households. The government’s commitment to a time-bound anti-money-laundering action plan is not a technocratic footnote. It is, economically, one of the most consequential items in the entire paper.

The diaspora provisions are interesting and slightly unusual. A ‘Return to Motherland’ package designed to bring back first-generation emigrants for retirement or reinvestment acknowledges something most governments prefer not to say out loud: the people who left were not unpatriotic, they were rational. The conditions at home did not justify staying. Creating conditions where return is financially sensible, through double taxation agreements and targeted incentives, is a smarter approach than moral appeals to national loyalty.

The proposed Economic Charter is the most politically ambitious item of all. Getting all major parties to agree that the economic agenda is off-limits to coalition horse-trading is, to put it mildly, a hard ask in a system where economic policy has always been one of the main things that gets traded. But the logic is sound. Investors do not need a particular ideology in government. They need assurance that when the ideology changes, the contracts still hold and the permits still mean what they said they meant.

None of this works without the bureaucracy. The ‘Time Cards’ for public service delivery and the expansion of the Nagarik App into a full digital service platform are the unglamorous end of the reform agenda. They are also the end that citizens actually experience. A farmer in Dang does not care about the GDP target. She cares whether the agricultural credit she applied for three months ago has been processed. Digitizing the state means her answer comes in days, not seasons.

What the commitment paper cannot do is deliver itself. Nepal has had good plans before. The 2015 earthquake reconstruction framework was well-designed. The federal transition roadmap had genuine technical quality. The implementation in both cases was, charitably, uneven. The difference this time is meant to be the two-thirds parliamentary majority, the technocratic leadership, and the ‘Balen-style’ political culture that has developed around actually delivering visible results rather than delivering speeches about results.

Whether that difference is real will be clear within eighteen months. Infrastructure projects either break ground or they do not. Laws either get passed or they stall in committee. Investors either start arriving or they keep flying over Kathmandu on their way to Vietnam.

Nepal has earned its skeptics. It has also earned, barely but genuinely, a second look.

The author is a senior financial sector professional with experience in central banking, enterprise risk management, AML compliance, and regulatory policy

Nepal’s banking system is once again at an inflection point. As Nepal Rastra Bank signals a possible relaxation of blacklisting provisions, a broader debate has quietly emerged within the financial sector. The issue is not merely about easing rules or providing relief to borrowers. It is about preserving the delicate balance between credit discipline and financial stability at a time when both are under strain.

Recent data from the Credit Information Bureau paints a stark picture. Over the past seven fiscal years, the number of blacklisted individuals has surged dramatically, reaching nearly 170,000 by FY 2024-25. The increase has been particularly sharp in the last three years, reflecting deeper structural stress in the economy. Check bounce cases account for a significant portion of this rise, while loan defaults have also accelerated, especially in retail segments such as credit cards, phone loans, and personal borrowing.

This trend cannot be dismissed as a mere statistical anomaly. It reflects underlying vulnerabilities in household finances, business cash flows, and credit underwriting practices. The post-pandemic recovery has been uneven, and many borrowers continue to operate in a constrained economic environment. At the same time, credit expansion in earlier years, particularly in unsecured and consumption-driven lending, is now translating into higher defaults.

Against this backdrop, the central bank’s concern is understandable. A rapidly expanding blacklist can limit access to formal finance and potentially shrink the pool of eligible borrowers. In an economy that relies heavily on small and medium enterprises, such exclusion can have broader implications for growth and employment. The question of whether the current system is overly restrictive is therefore a legitimate one.

However, the issue becomes more complex when viewed from the perspective of financial stability.

Blacklisting in Nepal has evolved into more than just a regulatory mechanism. It serves as a critical tool for enforcing credit discipline. The reputational cost associated with being blacklisted has historically played a significant role in encouraging timely repayment. In a system where formal enforcement mechanisms can be slow and costly, such behavioral incentives are particularly important.

Any move to dilute this signal must therefore be approached with caution.

One of the key concerns raised by the banking sector relates to the composition of blacklisted cases. Not all entries in the blacklist represent the same type of risk. Check bounce cases, for instance, are fundamentally transactional issues between private parties. They do not necessarily reflect systemic credit risk in the banking system whereas loan defaults directly involve public deposits and the integrity of financial intermediation.

Treating these categories uniformly can lead to policy distortions. It risks overestimating the extent of genuine credit stress while underestimating the importance of maintaining discipline in bank lending. A more nuanced approach is needed, one that distinguishes between different types of defaults and tailors regulatory responses accordingly.

Another important dimension is the recent removal of the threshold that previously exempted small borrowers from blacklisting. While this change may have been intended to standardize the framework, it has also contributed to a surge in the number of blacklisted individuals. Defaults on relatively small amounts, including credit card dues and short-term consumer loans, are now being captured alongside larger and more complex cases.

This raises questions about proportionality. A system that imposes identical consequences for vastly different levels of default may end up being both inefficient and inequitable. It can discourage risk-taking among small entrepreneurs while doing little to address larger structural risks.

At the same time, there is a genuine concern within banks that any relaxation of blacklisting provisions could encourage a culture of non-payment. Credit discipline, once weakened, is difficult to restore. Even a perception that enforcement is becoming lenient can alter borrower behavior. This is particularly relevant in the current environment, where recovery efforts are already challenging and non-performing loans remain a concern. The policy challenge, therefore, is not whether to relax or maintain the current system in its entirety. It is about how to recalibrate the framework in a way that preserves its core strengths while addressing emerging weaknesses.

A starting point would be to introduce greater differentiation within the blacklisting system. Separating transactional defaults, such as check bounce cases, from credit-related defaults would improve clarity and allow for more targeted policy interventions. This would ensure that measures aimed at easing business constraints do not inadvertently weaken the enforcement of loan repayment.

Another important step would be the introduction of a structured rehabilitation mechanism. Instead of treating blacklisting as a binary status, the system could allow for graduated re-entry based on demonstrated improvement in repayment behavior. Borrowers who make partial repayments, comply with restructuring agreements, or show consistent financial discipline over time could be moved to a monitored category. This would create incentives for recovery without compromising accountability. The suggestion from the banking sector to allow limited account operations for blacklisted individuals also merits consideration. Maintaining restricted access to banking services would enable better tracking of financial transactions and improve the prospects of loan recovery. At the same time, it would allow businesses to continue basic operations, reducing the likelihood of complete financial exclusion.

Revisiting thresholds and proportionality is equally important. Reintroducing differentiated treatment for small-value defaults could help prevent over-penalization while maintaining strict enforcement for larger exposures. Such an approach would align regulatory outcomes more closely with the scale of risk involved.

Beyond regulatory adjustments, there is also a need to strengthen credit information systems. More granular and real-time data on borrower behavior would enhance risk assessment and reduce reliance on blunt instruments such as blacklisting. A more sophisticated information ecosystem would allow both banks and regulators to identify emerging risks earlier and respond more effectively. The timing of these discussions adds another layer of significance. With key leadership positions at the central bank currently vacant and a new government in the process of formation, the policy direction adopted in the coming months will have lasting implications. This is a period that calls for careful calibration rather than abrupt shifts.

Ultimately, the objective must remain clear. The stability of the financial system depends on a delicate balance. Depositors must have confidence that their savings are secured. Banks must be able to extend credit with reasonable assurance of repayment. The regulator must ensure that this relationship is maintained through credible and consistent policies.

At the same time, the system must remain responsive to changing economic realities. Excessive rigidity can be as damaging as excessive leniency. The goal is not to choose between the two, but to find a balance that supports both discipline and inclusion. A rising number of blacklisted individuals should be seen as an early warning signal. It highlights underlying stress in the economy and points to areas where policy refinement is needed. Addressing this challenge requires a measured approach, one that combines regulatory clarity with practical flexibility.

Nepal’s financial system has made significant progress in recent years in strengthening governance, improving supervision, and enhancing transparency. Preserving these gains is essential. Any reforms in the blacklisting framework must build on this foundation, not undermine it. In the end, the question is not whether the system should be strict or lenient. The question is whether the system is effective. A well-calibrated framework can enforce discipline, support recovery, and promote inclusion at the same time. Achieving this balance will be key to safeguarding financial stability in the years ahead.

The opinions expressed here are personal views

When a major neighboring currency weakens, Nepal cannot afford to ignore it. The recent pressure on the Indian rupee is not only India’s problem. Because  Nepali rupee is pegged to the Indian rupee, Nepal inevitably feels the impact. When the rupee weakens against the US dollar, the Nepali currency moves in the same direction. That simple fact ties Nepal’s economic stability closely to developments across the open border.

The rupee’s recent weakness is not the result of a deliberate policy choice by India. It reflects a mix of global shocks and structural realities. Oil prices have surged because of geopolitical tensions in the Middle East. Investors have become more cautious and moved toward safer assets such as the US dollar. At the same time, interest rates in the US remain relatively high, making dollar assets attractive.

India’s own economic structure also plays a role. The country imports a large amount of crude oil and many industrial inputs that are priced in dollars. When oil prices rise, India’s import bill increases quickly. This pushes up demand for dollars and puts pressure on the rupee. Even though India has strong growth and a vibrant services sector, its merchandise trade deficit remains large.

There's a growing argument that a weaker currency helps developing economies by making exports cheaper. In theory, that can be true. Countries with strong manufacturing bases can gain competitiveness from mild currency depreciation. But that argument has limits. India imports a lot of fuel, machinery, chemicals, and electronic components. When the rupee weakens too sharply, the cost of these imports rises. That increases production costs and fuels inflation.

In other words, a weak currency is not always a blessing. It can also act like a tax on the economy.

For Nepal, the implications are more complicated because of the currency peg. Nepal Rastra Bank maintains a fixed exchange arrangement where 100 Indian rupees equal 160 Nepali rupees. This peg has long served as a monetary anchor. It simplifies trade with India and provides stability in a small and import-dependent economy. But the peg also means Nepal imports India’s exchange-rate movements. When the rupee weakens against the dollar, the Nepali rupee weakens too. That affects import prices and inflation inside Nepal.

The most obvious impact is on fuel. Nepal imports petroleum products largely through India. If global oil prices rise and the rupee falls, Nepal faces a double shock. Transport costs increase. Electricity backup becomes more expensive. Food distribution costs rise. Construction materials and industrial inputs also become costlier. Inflation can therefore increase even if domestic demand is weak. Nepal’s central bank has long recognized that inflation in India often spills over into Nepal because of the currency peg and the close trade relationship.

This does not mean Nepal is currently in a crisis. In fact, the country’s external position is stronger than it was just a few years ago. Foreign-exchange reserves have recovered significantly since the stress period of 2022. Remittance inflows remain robust, providing a vital cushion for the economy. Inflation has also moderated from earlier peaks.

But comfortable numbers today do not guarantee long-term security. Nepal’s external stability is more comfortable than it is structurally secure. The economy still depends heavily on remittances and imports. A combination of higher oil prices, slower remittance growth, or a surge in imports could again tighten the external account.

Remittances illustrate this paradox well. They are a lifeline for Nepal. Millions of Nepalis working abroad send money home, supporting families and boosting consumption. These inflows help finance imports and stabilize the balance of payments. But they also reinforce an economic model built on migration and consumption rather than production and exports.

For many young Nepalis, the path to economic success still runs through a foreign airport.

This structural dependence means Nepal remains vulnerable to external shocks. When global conditions change, the impact travels quickly through exchange rates, import prices, and financial flows.

What should Nepal do in this situation? First, policymakers should not panic about the currency peg. The peg remains useful because India is Nepal’s dominant trade partner. It provides stability and credibility in monetary policy. Changing the exchange-rate regime abruptly would likely create more uncertainty than relief. Instead, the focus should be on strengthening the defenses around the peg.

Nepal Rastra Bank should continue to maintain strong foreign-exchange reserves. Adequate reserves give the central bank the ability to manage volatility and reassure markets during periods of stress. Careful monitoring of imports and external payments is also essential.

Second, the government should manage imported inflation carefully. Fuel pricing is a good example. Sudden price increases can hurt households and businesses, but delaying adjustments for too long can create fiscal problems. A balanced approach that smooths price changes while protecting vulnerable groups is more sustainable.

Third, Nepal must reduce its structural dependence on imported energy. Hydropower remains the country’s greatest economic advantage. Expanding domestic electricity use and exporting surplus power can reduce fuel imports and strengthen the external balance over time.

Fourth, export diversification is essential. Tourism, hydropower exports, agro-processing, and niche manufacturing sectors all offer potential. Without stronger exports, Nepal will continue to rely on remittances and imports to sustain growth.

Finally, governance and economic management matter. Investors and entrepreneurs need stable policies, efficient infrastructure, and predictable regulations. Without these foundations, economic transformation will remain slow.

Households and businesses should also avoid overreacting to currency movements. A weaker rupee does not mean people should rush to buy dollars or speculate in foreign currency. Panic behavior can create unnecessary instability. Instead, firms should focus on managing costs and adjusting contracts when imported inputs become more expensive.

Some sectors may even benefit modestly. Remittances sent in dollars or other foreign currencies increase in value when converted into Nepali rupees. A weaker currency can also help certain exports in third-country markets. But Nepal’s export base remains limited, so the inflationary impact of currency weakness is likely to dominate. In the end, the lesson is simple: Nepal is not in immediate trouble, but it cannot afford complacency; external conditions remain uncertain; oil prices are volatile; global financial markets can shift quickly; and the Indian rupee may remain under pressure for some time.

Nepal should use this period of relative stability wisely. Strong reserves and remittances have provided breathing space. That space must be used to build a more resilient economy. Because when the rupee trembles, Nepal inevitably feels the shock. The real challenge is ensuring that the country becomes strong enough to withstand those shocks.