Nepal has made significant strides in reducing poverty, nearly eliminating extreme poverty, largely due to remittances. However, the World Bank's Nepal Country Economic Memorandum: Unlocking Nepal’s Growth Potential, released today, emphasizes the need for policy actions to enhance domestic opportunities and strengthen future growth.
Despite progress, Nepal's economic growth remains behind its regional counterparts. From 1996 to 2023, the economy grew at an average annual real rate of just 4.2 percent, placing it sixth among eight South Asian nations. Structural challenges such as low productivity, declining exports, and a stagnant industrial sector have hindered economic advancement and slowed job creation outside agriculture. Consequently, young workers are migrating abroad for better employment prospects.
"Nepal's success in poverty reduction is impressive, but its economic potential remains largely untapped," stated David Sislen, World Bank Division Country Director for Maldives, Nepal, and Sri Lanka. He highlighted the potential for stronger growth through reforms aimed at increasing migration returns, boosting exports, efficiently using hydropower, and enhancing digitalization.
Professor Dr. Shiva Raj Adhikari, Vice Chairman of the National Planning Commission said: "The 16th Plan for Nepal outlines a vision of good governance, social justice and prosperity and prioritizes productivity and competitiveness."
The memorandum suggests policy actions in four critical areas to unlock economic potential:
1. Migration: A systematic migration system could enhance returns from migration by integrating it into national development strategies.
2. Exports: Addressing infrastructure deficits and improving market competition can boost exports.
3. Hydropower: Developing a financing strategy will help mobilize investments in the hydropower sector.
4. Digital Sector: Updating legislation and adopting digital infrastructure would advance this sector's development.