The economy is in shambles, the citizens are crying out, and the ones in power are stuffing their ears with wads of cash. The recession currently faced by the nation is the result of decades of corruption, inefficiency, and misplaced priorities. It is also the result of low aggregate demand and low aggregate supply. The situation is further worsened by Nepal being on the Graylist, meaning it would be hard for Nepal to get foreign aid, and as USAID has been stopped, Nepal will be seeing some tough times in the future. For a country blessed with enormous and strategic geographical locations, the current situation stands as an example of neglect. The stagnation acts as a nudge for the nation to shutter its doors and start making decisive changes before it reaches a point of no return.

Recession: The price of neglect

For the first time in a while, Nepal has “officially” stepped foot into a recession. The Covid-19 pandemic triggered a worldwide financial crisis. In Nepal’s case, political instability, bolstered by further unnecessary bureaucracy and a lack of economic insight globally, slowed down progress and entrenched the problem of economic stagnation. 

Nearly half a decade has passed since the outbreak of the pandemic, and a significant number of nations have regained their positions, with states in the Global South, including Nepal, being the exception. Supporting evidence can be found in inflation rates soaring to numbers like 5.41 percent in Jan 2025 and the value of the Nepali currency dwindling to $0.0073 per rupee. 

Tourism and agriculture: Squandered opportunities

The tourism sector, which accounts for around 6.7 percent of Nepal’s GDP, remains below pre-pandemic visitor numbers, according to the Ministry of Culture, Tourism & Civil Aviation data from 2024. According to NTB data, Nepal welcomed approximately 1,147,024 foreign tourists in 2024, marking a around 13.1 percent increase compared to the previous year. This figure is close to the pre-pandemic record of around 1,197,191 tourists in 2019, which shows that Nepal is progressing but not at a rapid pace. Dependence on tourism as the primary economic driver without a solid plan for economic diversification will lead to an inevitable catastrophe. Major tourist sites not only face inadequate connectivity issues but also lack standard facilities and insufficient global platform promotion due to ongoing infrastructure weakness.

Recent statistics show that agriculture employs about 67 percent of the workforce and contributes approximately 24.5 percent to the GDP. It is still primitive, as 75 percent of farmers use traditional farming. It is almost impossible to think of a nation that lacks food products and imports said products worth over Rs. 340bn annually, but Nepal does (Federation of Nepalese Chambers of Commerce and Industry, 2024). The situation with climate change is affecting productivity, but prospering in harsh conditions leads to not having an adequate policy focused on it. The sponsorship in mechanization and the latest techniques of farming is not up to mark, and thus the farmers suffer due to the unpredicted rainfall, the high cost of energy, and so forth. 

Remittance dependency: A national shame

Nepal’s economy depends on remittance. Remittance inflows increased 16.5 percent to Rs 1445.32bn during 2023/24 compared to an increase of 23.2 percent in the previous year. In US dollar terms, remittance inflows increased 14.5 percent to $10.86bn in the review year compared to an increase of 13.9 percent in the previous year, as stated by Nepal Rastra Bank. This stream of money keeps Nepal running but causes high social and economic costs. The country does not create enough local jobs, and thus, the dependence on remittance leaves Nepal vulnerable to changes in other countries, as shown during the pandemic when remittance inflows dropped by 4.2 percent (Nepal Rastra Bank, 2024). The slow global economy in the Middle East and Malaysia—two main places for Nepalese workers—brings real risks to remittance flows in the coming years (International Monetary Fund, 2024). These statistics are not up to par, as this does not include India, where we have an open border system and who has the highest number of Nepali workers.

The recovery illusion

International organizations together with the government present GDP predictions for 2024 at 3.9 percent, but this information remains deceptive, as the Asian Development Bank notes in 2024. The growth rates of 5.8 percent in Bangladesh and 8.2 percent in India exceed Nepal’s tepid performance in 2023, where Nepal had a growth rate of two percent. Developing nations must view minimal economic growth as unsuccessful efforts that society perceives as advancement. Financial stability remains threatened because non-performing loans (NPLs) within the banking sector have reached around 5.8 percent, according to Nepal Rastra Bank (2024).

The clock is ticking

Nepal faces an important choice that will determine whether it will adopt bold economic reforms that lead to growth or continue its decline towards insignificance. All attempts at implementing fragile or shallow changes have become outdated. The country needs complete systematic changes such as:

• The government must reform its governance system to eradicate corruption while enhancing bureaucracies’ performance quality.
• We should promote industrial incentives to cut down the nation's dependence on foreign imports and migrant worker money transfers.
• We should work to establish modern agricultural methods that will bring Nepal to food production autonomy.
• There must be economic expansion past tourism and remittance by making substantial investments in manufacturing alongside adopting new technology.
• Education improvement initiatives will lower youth employment rates while stopping professionals from migrating abroad.
• Financial institution stability increases through enhanced banking rules and better credit mechanisms, which benefit small organizations and startup ventures.

All citizens of Nepal share responsibility for securing the future because this battle will determine what Nepal becomes in the coming years. Our leaders need to push for increased performance in our country. The current situation requires immediate action because the potential consequences bear too much weight. The future of Nepal demands change as time presents itself to create a positive transformation.

Ujain Shrestha

A Levels

Islington College, Kamalpokhari