KATHMANDU, Nov 10: Nepal’s economy is facing growing pressure as business confidence has sharply declined following the Gen Z protests, resulting in sluggish lending and weakened private sector morale.
Nearly Rs 1.1 trillion remains idle in the banking system due to limited credit expansion since the protests, leading to excess loanable funds but demand and investment confidence. The demonstrations triggered fear among investors, causing business sentiment to fall and raising concerns of capital flight.
The World Bank’s latest report has projected Nepal’s economic growth to remain limited to 3.1 percent this fiscal year, down from an earlier estimate of 5.2 percent, citing damages from the protests and subsequent political instability.
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The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) President Chandra Prasad Dhakal says the private sector suffered heavily during the Gen Z uprising. “Entrepreneurs invest through loans, adjustments and savings, but private property was attacked during the protests,” he said during a recent program, adding that business establishments, homes, hotels, industries and offices were targeted.
Dhakal noted that the private sector accounts for 81 percent of Nepal’s economy, contributes 86 percent to employment and over 80 percent to income tax. Losses amounting to an estimated Rs 88 billion were recorded during the protests. “When the backbone of the economy is shaken, revenue and jobs are directly affected,” he said.
Attacks on business houses, multinational companies and five-star hotels have sparked doubt among both local and foreign investors. While internal indicators show stress, external indicators remain stable.
Finance Minister Rameshore Khanal expressed concern that the absence of investment security could collapse industries. Former finance ministers, speaking at a recent forum, warned that the assault on entrepreneurs had led the business community to believe “nothing can be built here,” unless accountability is ensured. They stressed that failure to penalise arson, vandalism and looting would foster impunity and increase capital flight risks.
Minister Khanal said the government is committed to extending all possible support to restore business confidence. “Morale plays a crucial role in the economy. Both government and private sector must move forward with renewed energy,” he said, adding that consultations with businesses are underway nationwide to address challenges.
Nepal Rastra Bank Governor Dr. Bishwonath Paudel urged businesses to utilise the current monetary conditions as an opportunity. With lower interest rates, ample liquidity and foreign exchange reserves exceeding Rs 2.2 trillion, he encouraged the private sector to boost production and employment. “Use this period as an opportunity and work with high morale,” he said.
