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Tourist arrivals hit a three-year high in 2022, with 614,148 foreign visitors coming into the country, but their spending as well as average stay in Nepal has plummeted to a three-year low. According to the ‘Nepal Tourism Statistics-2022’ published by the Ministry of Culture, Tourism, and Civil Aviation, the average stay of tourists has dropped to 13.1 days in 2022. The average length of stay in 2021 was 15.5 days, a ten-year high. With tourists shortening their stay in Nepal, their spending too declined in 2022. The average daily spending of tourists declined to $40 per day, down from $48 per day in 2021. The Tourism Ministry’s data shows that tourist arrivals and tourism earnings both surged significantly in 2022. Nepal welcomed over 600,000 tourists last year while tourism income rose to a three-year high of $326.28m. The surge in the number of tourists has not resulted in a significant increment in their spending during their stay in Nepal. With mainly budget travelers coming to Nepal, tourism entrepreneurs say the decline in the length of stay, and their average daily spending is natural. “A large number of tourists visiting Nepal are average spenders. We do not get affluent tourists who could spend handsomely during their stay in Nepal,” said Vinayak Shah, president of the Hotel Association of Nepal. According to travel trade entrepreneurs, the fear of the Covid-19 pandemic was still there in 2022, forcing travelers not to stay for a long time. “As international travel was opened across the globe fully in 2022, it takes some time to return to normalcy,” said Shah. Hoteliers and tour operators said tourists from European countries spend more than other countries. “But tourist arrivals from European countries in 2022 surged compared to 2021, but have not reached the level of 2019,” said Bishwesh Shrestha, owner of C&K Travels. Tourism entrepreneurs emphasized the need to create an environment to lengthen the stay of foreign visitors. According to them, there is a dire need to upgrade the tourism infrastructures. While the country has seen more five-star, four-star hotels, there are still issues related to product and service diversification. “There is a bottleneck in tourism infrastructures. The Tribhuvan International Airport cannot cater to more tourist flow than what it is catering now,” said Shah, “While the two international airports are yet to be operated fully.” The number of foreign visitors entering Nepal grew by 306.82 percent in 2022, putting an end to a two-year downward spiral that started in early 2020 when the coronavirus outbreak wreaked havoc across the world. While the number of foreign visitors entering Nepal grew significantly, it is still 48.70 percent lower than in 2019 when 1.19m arrivals were recorded. In the first half of 2023, the tourist arrivals surged by 97.79 percent to reach 476,507. With healthy growth in tourist arrivals from the start of this year, tourism entrepreneurs are expecting 1m international visitors in the country by the end of 2023. While tourist arrivals have improved significantly compared to the last three years, the number is yet to touch the pre-Covid level. Nepal had received 573,658 tourists in the first six months of 2019. The arrival of foreigners in the first six months of 2023 is 83.06  percent compared to the same period in 2019. With the easing of travel restrictions and China reponing outbound travel for its citizens, Nepali tourism entrepreneurs are pinning high hopes for 2023. In 2022, tourist arrivals reached over 600,000 without any significant contribution from China. Only 9,595 Chinese tourists visited Nepal in 2022. Tourists’ length of stay Year Days 2022 13.1 2021 15.5 2020 15.1 Average expense per visitor Year Expense 2022 $40.5 2021 $48 2020 $65 Tourism earnings Year Expense 2022 $326.28m 2021 $112.50m 2020 $217m

With only one week left to end the current fiscal year, there has been a dramatic surge in government budget spending. The government’s average daily spending has reached Rs 11.5bn in the last nine days, which during normal days, used to stand at Rs 5-6bn per day. The data of the Financial Comptroller General Office which keeps track of the government’s income and expenditure, shows both recurrent and capital expenditure has surged in recent weeks. On Saturday (July 8), despite being the weekend, the government paid out Rs 16.23bn. As the new fiscal year starts on July 16 (Shrawan 1), the annual budget of the government should be spent by mid-July (Ashad-end). However, the budget implementation and payment remain slow in the initial months, only to pick up in the last quarter. As expected, there has been an improvement in capital spending in Ashad. In the first 23 days of Ashad, the capital expenditure has increased by Rs 36.96bn. The government’s average daily spending has reached Rs 2.74bn in the last nine days. The government’s capital expenditure as of July 8 reached Rs 190.04bn, which is 60.55 percent of the revised capital budget for the current fiscal year 2022/23. The government had initially set a capital expenditure target of Rs 380.38 billion which was slashed to Rs 313.85 percent in the half-yearly review of the federal budget. The last-minute increment in fund utilization has raised the question of the quality of capital spending in the country. The majority of capital spending takes place in the last month of the fiscal year i.e., Asar (mid-June to mid-July). The report of the Office of the Auditor General (OAG) also shows that 40 percent of the total capital expenditure takes place in Asar. In Nepal, government spending is carried out under three headings—recurrent expenditure, capital expenditure, and expense on financial management. Recurrent expenditure is mainly associated with administrative costs, including operation grants, capital grants, and costs for ongoing projects. Capital expenditure involves expenses made in infrastructure development, construction, and other sectors that help generate real capital in the country. According to government officials, it is natural to see a surge in government payments due to the obligation to spend the current year’s budget within the fiscal year (mid-July). But economists say that the trend of expediting spending only in the last month of the fiscal year shows the government’s fiscal indiscipline. This pattern of spending increases the possibility of sub-standard quality of capital projects and an increase in recurrent spending, in operations and maintenance costs, for the coming years, they said.  “This also shows that the government is not adhering to fiscal discipline,” said economist Chandra Mani Adhikari. In order to resolve this perennial problem, Adhikari suggested that the budget spending system should be made scientific.

While the government is struggling with revenue collection, it is also not able to get foreign assistance as expected. The commitments of foreign loans and grants to the government have declined by 24.09 percent in the first 11 months of the current fiscal year. With only two weeks left to end the fiscal year, the government has been able to receive foreign assistance commitments of Rs 170.51bn in this fiscal year. Bilateral and multilateral donors had given aid commitments of Rs 224.64bn during the first 11 months of the last fiscal year. The government in the current fiscal year budget has initially targeted to receive Rs 297.71bn in foreign grants and loans for this fiscal. However, it reduced the target to Rs 209bn during the mid-term review of the budget. According to the Finance Ministry, it has entered into an agreement with foreign donor agencies to take loans and grants for different 22 projects and programs till mid-June. Of the total assistance, Rs 129.84bn is the loan while Rs 40.67bn is grant. The statistics of the Finance Ministry show commitment to both loans and grants has declined in this fiscal. However, grant commitments have declined by 55 percent in this fiscal compared to the last fiscal. Of the total aid commitment received in this fiscal, the largest commitment is from the World Bank (43 percent), followed by ADB (25.3 percent, the United Kingdom (13 percent), and Japan (10 percent). The government has prioritized receiving foreign aid in the form of budget support which Nepal can utilize in its priority areas. The government’s International Development Cooperation Policy (DPC)-2019 has highlighted that budget support is the country’s most preferred official development assistance modality. According to the ministry, development policy credit (DPC) worth Rs 12bn has been received from the World Bank for Green, Resilient, and Inclusive Development (GRID). In August last year, the two sides signed a  concessional financing agreement of $100m (equivalent to Rs. 12.7bn) for the GRID. The proposed budgetary support aims to support improvements in the enabling environment in Nepal toward green, climate-resilient, and inclusive development. This is the first in a programmatic series of three concessional loans on GRID, according to the World Bank. Likewise, the ministry said that the government also received Rs 3bn from the Asian Development Bank under its policy-based lending heading which is also budgetary support. The government and the World Bank in the last week of May signed a financing agreement for a $120m concessional loan from the International Development Association and a grant agreement for $19.7m from the Global Partnership for Education for the School Sector Transformation Program (SSTP) Operation, which support the implementation of the government's flagship School Education Sector Plan. The government also signed a $140m agreement with the World Bank for the Digital Nepal Acceleration (DNA) Project. The other multilateral lender, Asian Development Bank (ADB) in the last week of June approved a $50m loan to support the implementation of policy reforms by the government of Nepal to help improve its domestic and international trade. The ADB on May 17 approved a $300m loan to improve transport connectivity of the Kakarbhitta–Laukahi road in Nepal to international trade routes, particularly to India and Bangladesh. Amid declining revenue collection, the government has sought $200m from the Asian Development Bank in budgetary support to finance the resource gap. With the government struggling to maintain a balance on fiscal management, Finance Minister Prakash Saran Mahat on May 11 requested development partners for loans and substantial grants to Nepal. Mahat had made such a request during a discussion with the international development partners, saying that as Nepal has been affected by global climate change despite the country's negligible carbon emission, the aid should also be mobilized in the form of grants.  

The Nepal Electricity Authority (NEA) is facing challenges in ensuring a steady supply of electricity due to delays in the construction of two transmission lines. As a result, both industrial and household consumers are experiencing power cuts, despite the NEA having surplus electricity during the rainy season. NEA officials have stated that the intermittent power cuts are a direct result of the delay in constructing the transmission lines. The construction of the Hetauda-Dhalkebar-Inaruwa 400 kV and Hetauda-Bharatpur-Bardaghat 220 kV transmission lines has been ongoing for more than a decade, far beyond the originally planned completion time of three years. “The NEA’s system is under pressure due to the delay in these two transmission lines,” said Dirghayu Shrestha, the chief of the Transmission Directorate at NEA. “These projects have faced obstacles from the local community and have also been subjected to court-issued stay orders. Completing these transmission lines would have significantly increased our distribution capacity.” Due to the delay in constructing high-capacity transmission lines, the NEA is currently transmitting only around 80 MW using its old transmission system. The new lines would have supported the transmission of up to 300 MW. The construction of a 400 kV transmission line is essential for transmitting electricity to western Nepal from the Dhalkebar substation. The existing 132 kV transmission line in Hetauda is unable to carry sufficient electricity to supply the western region. As a result, NEA is unable to meet the demand and purchase electricity from independent power producers. Both transmission line projects were started with loan assistance from the World Bank. However, due to the construction delays, the World Bank withdrew from the projects in 2021. The World Bank had originally provided a $138 million concessional loan to fund the transmission lines, with the expectation that the projects would be completed within three years. While the contractor for the 400 kV transmission line was awarded the project in 2011, the contractor for the 220 kV transmission line was selected in 2009. Hetauda-Dhalkebar-Inaruwa 400 kV The NEA has prioritized the Hetauda-Dhalkebar-Inaruwa transmission line for strengthening its transmission network and facilitating power trade with India. “This trunkline is crucial for importing power from India and supplying it to industrial corridors in Birgunj and Biratnagar,” said Shyam Kumar Yadav, chief of the Hetauda-Dhalkebar-Inaruwa 400 kV project. Yadav added that the transmission line, to be built under the US government’s MCC project, will be connected to this trunk line. The project involves the installation of 792 towers. However, the project has faced challenges in constructing eight towers in Sarlahi and 25 towers in Makwanpur due to protests of the local people. “The locals are requesting a change in the transmission line’s route, but it is not feasible at this point,” added Yadav. The transmission line is being built by a joint venture between Angelique International from India and LTD from Germany. The project was initially estimated to be completed in 30 months, but it faced a four-year delay in obtaining forest clearance and an additional four years due to a court case. “If there are no further obstructions, we expect to charge the Inaruwa-Dhalkebar section of this transmission line within five months,” stated Yadav. “The completion of the Dhalkebar-Hetauda section is estimated to take one and a half years.” Hetauda-Bharatpur-Bardaghat 220 kV According to Santosh Sah, Chief of the Hetauda-Bharatpur-Bardaghat 220 kV transmission line project, one of the circuits of the double-circuit 220 kV transmission line will be operational within two weeks. “Currently, testing is underway on the Hetauda-Bharatpur section. Once this section is operational, NEA will be able to transmit 160 MW through this segment,” Sah stated. The Bharatpur-Bardaghat section is expected to be ready within three months. Out of the two remaining towers to be erected on this section, the first one is ready, and work is underway on the second tower. “Within 15 days of completing the tower construction, we will be able to install the wires,” Sah added. The project, originally estimated to be completed in 21 months, has experienced a delay of 14 years.