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In what could caution the country’s policymakers as well as government officials, the country’s foreign education and abroad travel bills have crossed Rs 100bn in the first 11 months of the current fiscal year. While Nepal spends a huge amount of its foreign exchange on import bills yearly, foreign education and abroad travel has emerged as the other major areas where the country’s hard-earned foreign currency is being spent. 

According to the latest macroeconomic report of Nepal Rastra Bank (NRB), Nepalis have spent Rs 119.98bn this fiscal for foreign travel and payment for education abroad.

The amount spent by Nepalis for these two purposes is much higher than the country’s tourism income during the same period. Foreign tourists spent as much as Rs 58.6bn in Nepal in the first 11 months of the current fiscal year.

The NRB data shows a total of Rs 89.18bn have been sent abroad in the first 11 months of this fiscal to pay the education bills of Nepalis studying in foreign colleges and universities. Nepalis had spent as much as Rs 67.7bn for education abroad in the first 11 months of the fiscal year 2021/22. In FY 2020/21 and FY 2019/20, spending for education decreased to Rs 24.95bn and Rs 25.81bn, according to the NRB.

Likewise, Nepalis are spending heavily on traveling to other countries as tourists. According to NRB data, as much as Rs 30.8bn was spent on foreign travel during the first 11 months of the current fiscal year.

“Nepalis are spending large amounts of foreign exchanges for travels abroad for different purposes in recent years,” said the NRB official. “As Nepal is an open economy, we cannot control such spending.”

Nepalis spent as much as Rs 97.32bn in the last fiscal year 2021/22 for travels abroad both for visiting foreign destinations and studying abroad which is triple the amount the country earned from foreign travelers. Nepal earned as much as Rs 32.44bn from foreign visitors in the last fiscal year. Nepal’s tourism earnings were battered by travel curbs after the Covid-19 pandemic which has been recovering lately. The country earned only Rs 7.26bn from foreign tourists in the fiscal year 2020/21, according to NRB. But the country’s tourism is reviving which is clearly indicated by the growth in foreign visitors in 2022. 

Rising travel spending

The Supreme Court has ordered the local governments of Kaski to remove all structures that have encroached upon the major lakes in the district. Over a dozen laws authorize local governments to protect and preserve the lakes in their respective areas. Since the construction of a check dam in Fewa Lake in 1999, various laws and policies relating to lake protection, environmental conservation, land reformation, irrigation, agriculture, biodiversity, climate change, and wetland conservation have been drafted. Additionally, all eight lakes in the Pokhara Valley have received Ramsar site status. However, encroachment around the lakes has continued unabated. Since the political change in 2006, the Supreme Court has issued over a dozen orders to the government to remove illegal structures built on lake areas. Similarly, the Constitution of Nepal, 2015 empowers local governments to preserve lakes and other natural resources in their respective areas. However, despite more than half a decade since the promulgation of the constitution, encroachments in Fewa Lake remain unabated. Disappointed by the indifference of the people’s representatives to the preservation of Fewa Lake, civil society in Pokhara has begun to join forces to voice their concerns against the encroachment of lakes in the Pokhara Valley. Recently, they have been putting pressure on the government almost daily. “We have approached the local government many times before, drawing their attention to the encroachment of lakes, but they seem unresponsive,” said Ram Bahadur Poudel, founder coordinator of Civil Society Kaski. “There are strong laws and policies to preserve the lake, but dozens of hotels and restaurants continue to spring up on the lake shores, encroaching upon the lake area.” The Pokhara Valley is home to several large and small lakes, including Khaste, Gudey, Neureni, Maidi, and Dipang, along with Fewa, Begnas, and Rupa, which are popular among visitors. Civil society and other stakeholders have launched numerous campaigns to save these lakes. They have published more than two dozen press releases, held meetings with mayors and ward chairs dozens of times, and run joint campaigns to clean up the lakes in collaboration with social organizations such as youth clubs, women’s groups, and cooperatives. “We will not give up our campaign until illegal structures built on the lake area are removed,” said Bishnu Hari Adhikari, a leader of Civil Society Kaski. Local residents say that encroachment on Fewa Lake has increased further after the metropolis introduced a new rule allowing people to use land near the lake shores for agricultural purposes. Under the guise of starting agricultural ventures, unscrupulous individuals have developed land plots on over 300 ropani of Fewa Lake’s land in just three months, according to Liladhar Poudel, chairperson of the District Coordination Committee, Kaski, and coordinator of the Fewa Watershed Area Monitoring Committee. Under mounting pressure, Pokhara Mayor Dhana Raj Acharya has stated that the metropolis will not compromise on the preservation of Fewa Lake. “We are preparing strong guidelines to prevent encroachment on the lake,” he added. However, civil society leaders say they do not believe in mere lip service. “We have been hearing commitments like this for many years. What we want now is implementation,” said Shashi Tulachan, another leader of Civil Society Kaski. Both the constitution and the Local Government Operation Act, 2018 empower local governments to make policies regarding the protection of local resources. “However, the rules under the constitution and policies have overlapped in many ways, resulting in delays in implementing strong policies,” said Kalpana Devkota, CEO of the Gandaki Province Office of Lake Conservation and Development Authority.  

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.