In the very first page of the first chapter of Nepal 2043: The Road to Prosperity are two maps. The first places Nepal right at the epicentre of Asia, and in the second the Kathmandu is at exactly the midpoint between Mumbai and Beijing. With his trademark optimism, author Sujeev Shakya says Nepal is not land-locked but land-linked to three billion people in China and India. We just need those two economic engines to pull us in the same direction. ‘With China and India becoming the two largest economies in the world in the next two decades … Nepal is the most valuable piece of real estate in the world,’ Shakya writes. For one thing, Nepal does not look beyond India and China for tourism — with the right policies it can attract millions of tourists just from those two countries. Nepal is set to graduate from a low- to a middle-income country by 2026 and to a high-income country in 2043 — hence the name of the book. The year 2043 in the Bikram Sambat calendar is also 2100 — a new Nepali century. The book delves into the past, present and future of Nepal and analyses enablers including hydropower, a fundamental transformation of which will drive the 2043 goal. The commoditisation of electricity will be the biggest transformation. Nepal can deploy ‘Cyber Gurkhas’ to attract foreign investors with the management of data centres with climate friendly renewable energy. Access to technology such as precision agriculture, a data-driven approach to farming to improve food production, reduce environmental impact and enhance profitability could be Nepal’s strategy into 2043 and beyond. ‘Earlier, we needed ploughs and strong hands in agriculture. Now, you need a computer and strong fingers,” Shakya writes, citing a neighbour’s son who inspects his crops from drone cameras. A farmer in an Ilam teashop tells the author he asks AI questions in Nepali, and it answers promptly. The biggest enabler of all is Nepal’s young demography with 62% of the population in the active 15-60 age bracket, while 28% are younger than 14. Nepal’s dependency ratio has dropped to the lowest in history with 100 Nepalis having to support 62 dependents. But this demographic dividend window is closing. Nepal’s total fertility rate declined from 2.62% in 1981 to 0.92% in 2021 — below replacement level. We have less than 30 years left to make the best use of the youth, many of whom are currently studying and working abroad. Nepal’s biggest resource, therefore, is its diaspora spread across the world who send home $20 billion a year. Migration is not just a necessity but an aspiration for many Nepalis, and they are an important source of contacts, investment and soft power. This young and educated group has taken advantage of connectivity and digitisation in all arenas of national life. TikTok and Instagram have become e-commerce platforms, or mobile app-riven digital services. Nepal’s software companies exported over $1 billion worth of IT products last year. Next we need a change in the bureaucratic mindset to eliminate paper and manual processes, which would also contribute to reducing corruption. Shakya comes up with many revelations: 81% of Nepalis live in houses they own, much higher than most other South Asian countries which means higher disposable income. Nepal has the highest tax-to-GDP ratio in South Asia. The banking sector is twice the size of Bangladesh despite Nepal having just one-fifth of its population. In 2021, 12.62% of the population had demat accounts in Nepal, while India had only 5.32%. For every five male investors, there are four women in Nepal while it is 10:1 in India. With such figures and prospects, how come Nepal just went through a violent uprising that took the shortest time to topple a democratically-elected government in modern history? One early chapter of 2043 is actually dedicated to how Nepalis have always thrived on chaos. When people faced up to 20 hours of power cuts a day, people worked around the load-shedding schedule, woke up at ungodly hours to cook and stock up on inverters. They did not put up a fight, or even protest. ''Generally, Nepalis are used to taking things lying down, and perhaps this also needs to change,' says Shakya, writing that line before last month’s uprising. ‘On the one hand, some of these issues speak volumes about the average Nepali’s patience and perhaps optimism that things will change in the long run. On the other hand, one is also forced to wonder how much longer they will be able to put up with unfavourable conditions if things don’t change.’ It does seem Nepali had enough with corruption, governance failure and political apathy to the concerns of ordinary people. The final chapter lists the non-negotiables to realise the 2043 Nepal Roadmap: democratic values and freedom of speech, a capitalist welfare state and socio-political transformation to tackle corruption and impunity. The book notes, ‘Countries transitioning to democratic rule experienced a 20% increase in GDP over a 25 year period compared to what they would have achieved under authoritarian regimes. After the end of the Shah rule in 2006, Nepal’s GDP rose from US$10 billion to US$44 billion by 2024.’ The government’s Vision 2030 document projects Nepal’s GDP at US$100 billion, and the Vision 2043 estimates that it will be a US$423 billion economy with a per capita of US$12,100. However, it will need more than optimism and practical action to make these projections real. China and India loom large throughout the book with examples of small city states like Singapore which have taken advantage of their strategic location. Despite the tension between India and China, the two will have to collaborate given the inherent advantages. China has replaced the United States as India’s biggest trading partner. Sujeev Shakya is a great admirer of former Singaporean diplomat and author Kishore Mahbubani, and he has written a blurb for the book. He quotes Mahbubani saying that for the past 2,000 years, apart from the last two hundred, Asian countries have dominated the world, and it is quite natural that the world’s economic centre is returning to Asia. And Nepal is strategically placed to make the most of it because of its location between two of the world’s fastest growing economies. We just have to get our politics right, and have a strategy for equitable growth in the new Nepali century.  <figure><img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20251016091052_78b2d1495d59cd492a17693e0e770b65230c7cb749393ac6643f4676b73832ef.jpg" data-media-id="editor_0" data-image-id="20251016091052_78b2d1495d59cd492a17693e0e770b65230c7cb749393ac6643f4676b73832ef" data-rendition-name="original" width="1136" height="702" loading="lazy" alt="Sujeev Shakya book details NT"></figure>

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Retrofitting Nepal for future shocks

Nepal is now a remittance-driven economy and <a href="https://nepalitimes.com/opinion/comment/nepal-is-not-a-country-of-villages-anymore">rural areas</a> are emptying due to <a href="https://nepalitimes.com/opinion/the-road-out-of-nepal">outmigration</a>, yet 62% of Nepal’s population still relies on farming and it contributes to a fourth of the country’s GDP.&nbsp; Successive governments have spent Rs107 billion in the past five years on agricultural subsidies, and banks have extended flexible loans worth Rs367 billion to farmers and <a href="https://nepalitimes.com/here-now/nepal-makes-farming-viable-again">agro-businesses </a>in the last decade. By 2024, loans from private financial institutions had grown eight-fold in ten years. &nbsp; All this was designed to increase farm productivity, stimulate the economy, create jobs in agriculture and reduce imports. Some of that has happened, but not commensurate with the money spent.&nbsp; Investment in the agricultural sector has increased by an average of 23.4% every year in the past ten years, but the average annual growth in farm production since 2015 is only 2.77%. In fact, agricultural productivity has actually dropped, and food imports (mainly from India) have soared.&nbsp; <div class="embed-block"><iframe title="Grants for farmers (in billion Rupees)" aria-label="Column Chart" id="datawrapper-chart-LX2LG" src="https://datawrapper.dwcdn.net/LX2LG/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="438" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"]){var e=document.querySelectorAll("iframe");for(var t in a.data["datawrapper-height"])for(var r=0;r<e.length;r++)if(e[r].contentWindow===a.source){var i=a.data["datawrapper-height"][t]+"px";e[r].style.height=i}}}))}(); </script></div> The question then is: where did all that money go? Evidence points to the budget being leaked along the way with little of it reaching the intended beneficiary farmers. &nbsp; Nepal Rastra Bank data shows that commercial loans to commercial farms, tea estates, livestock farms and fisheries accounted for 4.5% of all loans, which in 2014 alone totaled Rs50.99 billion. The government had made it mandatory for banks and financial institutions to provide 15% of its loans to farmers and agro-businesses by 2027. &nbsp; By 2024, agricultural loans accounted for 8% of the total loans provided by commercial banks – of this 22% went to farming, 37% to livestock and 39% to agro-businesses. In recent years, concessional loans are also provided to farmers in which the government provides a 5% interest subsidy. For instance, if a bank issues an agricultural loan at 9% interest, the government will pay 5% of it. By mid-November last year, Rs100 billion worth of such subsidised loans had been approved.&nbsp; <div class="embed-block"><iframe title=" Nepal’s agricultural loans (in billion Rupees)" aria-label="Interactive area chart" id="datawrapper-chart-OSP0N" src="https://datawrapper.dwcdn.net/OSP0N/1/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="405" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"]){var e=document.querySelectorAll("iframe");for(var t in a.data["datawrapper-height"])for(var r=0;r<e.length;r++)if(e[r].contentWindow===a.source){var i=a.data["datawrapper-height"][t]+"px";e[r].style.height=i}}}))}(); </script></div> The government has also provided outright grants to increase agricultural production. The Ministry of Agriculture and Livestock Development released data last week showing that grants worth Rs107 billion had been distributed in the last five years. &nbsp; Given such generous outlays, there should have been an improvement in food production by now. Yet Nepal produced a little over 9.5 million tons of cereal crops in the fiscal year 2014, and ten years later it had risen only slightly to 10.9 million tons.&nbsp; The improvements are restricted to pulses, fruits, and vegetables. In the last decade, the production of cash crops increased by 8.8%, other fruits by 4.6%, and vegetables by 2.5% annually. &nbsp; Meanwhile, <a href="https://nepalitimes.com/news/nepal-less-and-less-able-to-feed-itself">Nepal’s agricultural imports doubled</a> over the same period, from Rs130 billion in 2014 to almost Rs257 billion last year. The country imported about Rs46 billion worth of food, Rs28 billion worth of vegetables and Rs23 billion worth of fruits just last year.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20250203090228_3c209bcad42b940e6222511d435b1995c34aca4afb76afb5559218758416bc22.jpg" data-media-id="editor_6" data-image-id="20250203090228_3c209bcad42b940e6222511d435b1995c34aca4afb76afb5559218758416bc22" data-rendition-name="original" width="937" height="625" loading="lazy" alt="Farm subsidies: money down the drain NT"> </figure>  Some of the support for the government’s agriculture programs has come from international donors, including the Project for Agriculture Commercialisation and Trade (PACT), Nepal Agriculture and Food Security Project (AFSP), Nepal Livestock Sector Innovation Project, High Mountain Agribusiness and Livelihood Improvement Project, and the Rural Enterprise and Economic Development (REED) Project.&nbsp; Despite this, agricultural production has not increased, and the quality of life of farmers has deteriorated to the point where many are abandoning agriculture altogether. Funds meant to uplift farmers are wasted on administrative work, consultant fees, training seminars and other purchases.&nbsp; Read also: <a href="https://nepalitimes.com/here-now/helping-farmers-who-help-themselves">Helping farmers who help themselves</a>, Benjamin Zimmerman The Agricultural Commercialisation and Trade Project for Nepal was launched in 2018, for which the World Bank provided a Rs2.06 billion grant and Rs2.92 billion loan. The Bank's own investigation showed that of the grants, a large proportion was pocketed by middlemen along the way. Another Rs810 million went to consultants for teaching farmers about agro-businesses, Rs680million to pay the salary and allowances for staff, Rs460 million was spent on buying vehicles and equipment, and Rs110 million for training seminars. Project officials also spent Rs40.8 million on foreign junkets. &nbsp; <div class="embed-block"><iframe title="Cereal crop production (in million metric tons) " aria-label="Column Chart" id="datawrapper-chart-Mlblc" src="https://datawrapper.dwcdn.net/Mlblc/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="389" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"]){var e=document.querySelectorAll("iframe");for(var t in a.data["datawrapper-height"])for(var r=0;r<e.length;r++)if(e[r].contentWindow===a.source){var i=a.data["datawrapper-height"][t]+"px";e[r].style.height=i}}}))}(); </script></div> An audit report showed that 40% of the total funding was spent on administrative work. The Bank even sent a letter in 2020 to Yubaraj Khatiwada, who was finance minister then, alleging corruption and requesting action. Nothing was done about it. The Improved Seed for Farmers Program, a Rs3.28 billion project for six districts in western Nepal supported by the International Fund for Agricultural Development (IFAD) and other institutions, also had anomalies. An audit report records purchase of 178 motorcycles, 20 four-wheelers, more than 200 laptops and tablets, 49 desktop computers, as well as dozens of photocopy machines, printers, and cameras totalling more than Rs322.1 million.&nbsp; Another Rs203 million was spent on consulting services, Rs505.3 million on training seminars, and Rs597.1 million on salary and allowances for staff. &nbsp; “This is clear evidence of <a href="https://nepalitimes.com/news/aid-rarely-aids-agriculture-in-nepal">agro-washing</a>, agriculture is simply a front for other business dealings,” alleges Biswash Gauchan of the Institute for Integrated Development Studies (IIDS).&nbsp; <div class="embed-block"><iframe title="Nepal’s agricultural imports (in billion Rupees)" aria-label="Interactive line chart" id="datawrapper-chart-0FwSO" src="https://datawrapper.dwcdn.net/0FwSO/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="428" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"]){var e=document.querySelectorAll("iframe");for(var t in a.data["datawrapper-height"])for(var r=0;r<e.length;r++)if(e[r].contentWindow===a.source){var i=a.data["datawrapper-height"][t]+"px";e[r].style.height=i}}}))}(); </script></div> An Auditor General’s report a few months ago cited examples of misuse of agricultural loans, and recommended that the government recover the low-interest government-administered agricultural subsidy with penalties. A similar study on agricultural loans by the Central Bank last year found that 14% of concessional loans given out by banks and financial institutions were being misused. In response, the Finance Ministry stopped administering Interest Subsidy Loans last year. Studies by other government agencies concluded that investment in agriculture in Nepal has been ineffective. Even a Ministry of Agriculture task force concluded six years ago that government farmer grants had ‘poured money down the drain’. The report found that the benefits went not to farmers and agro-businesses that needed help, but almost exclusively to those in collusion with higher-ups in charge of the grants. The funds, concluded the study, went towards the purchase of vehicles, luxury goods and other facilities rather than contributing to the agricultural sector.&nbsp; <div class="embed-block"><iframe title="Nepal’s annual economic growth and agricultural growth rate (in %)" aria-label="Interactive line chart" id="datawrapper-chart-hzgjW" src="https://datawrapper.dwcdn.net/hzgjW/2/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="495" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"]){var e=document.querySelectorAll("iframe");for(var t in a.data["datawrapper-height"])for(var r=0;r<e.length;r++)if(e[r].contentWindow===a.source){var i=a.data["datawrapper-height"][t]+"px";e[r].style.height=i}}}))}(); </script></div> Former NRB executive director Nar Bahadur Thapa says the reason agricultural loans appear to be increasing while agricultural production has not risen is because the loans have been ostensibly taken for agriculture but poured into real estate speculation.&nbsp; “It is not enough just to pour money into the agriculture sector, government and financial schemes will only yield results when we create appropriate infrastructure and markets and facilitate trade,” says Hari Bahadur KC, chair of the committee set up by the Ministry of Agriculture to evaluate government subsidies. It is clear that the problem lies in dysfunction in the government’s delivery mechanism and corruption right up the line. The investment will not lead to increased productivity until the grants, loans, and subsidies stop lining the pockets of the wealthy and connected.&nbsp; “It is an open secret that the grants are being misused, but no one wants to own up to this fact and take moral responsibility,” says Uddhav Adhikari, former president of the National Farmers Group Federation (NGNF). “We need to strengthen monitoring to <a href="https://nepalitimes.com/news/save-farms-empower-farmers-nepal-citizens-appeal">ensure that subsidies are provided to small-scale agro-businesses and farmers</a>, and that they are utilised properly.” &nbsp; Read also: <a href="https://nepalitimes.com/here-now/back-to-the-land-in-the-cities">Back to the land in the cities</a>

Farm subsidies: money down the drain

From high school, Nepali students memorise that Nepal is an ‘agricultural country’, and that 80% of the population is engaged in farming.
While it is true that most Nepalis are still dependent on agriculture, the country’s economy is shifting to services. Seven in every ten families also depend on remittances for household income.&nbsp;
Agriculture now contributes less than 25% to Nepal’s economy, and this is down from 81% three decades ago. The number of Nepalis engaged in the service sector used to be only 16% at that time, and today it has gone up to 29%.&nbsp;
Nepal’s economy has been transformed in recent decades during which new professions, businesses and enterprises have flourished. The finance, information technology (IT), hospitality, trade and other sectors have expanded.&nbsp;
Meanwhile, the role of agriculture in Nepal’s economy has diminished.&nbsp;
The strength of a country's economy is measured by the total value of goods and services produced annually, its GDP. Economies are divided into three sectors of activity: agriculture and forestry, manufacturing and construction and the service sector, which includes IT, finance, insurance, real estate and tourism.
Economies move through a cycle of expansion from the primary to the secondary to the tertiary sectors. Many developed countries are considered to have advanced because of the industrial sector.&nbsp;
However, Nepal’s industrial sector has not grown in comparison to other nations. Indeed, while the industrial sector contributed 8% to the economy 50 years ago, it reached a peak of 21% some decades later, but at present has declined to 12.5%.
<div class="embed-block"><iframe src='https://flo.uri.sh/visualisation/18533507/embed' title='Interactive or visual content' class='flourish-embed-iframe' frameborder='0' scrolling='no' style='width:100%;height:600px;' sandbox='allow-same-origin allow-forms allow-scripts allow-downloads allow-popups allow-popups-to-escape-sandbox allow-top-navigation-by-user-activation'></iframe><div style='width:100%!;margin-top:4px!important;text-align:right!important;'><a class='flourish-credit' href='https://public.flourish.studio/visualisation/18533507/?utm_source=embed&utm_campaign=visualisation/18533507' target='_top' style='text-decoration:none!important'><img alt='Made with Flourish' src='https://public.flourish.studio/resources/made_with_flourish.svg' style='width:105px!important;height:16px!important;border:none!important;margin:0!important;'> </a></div></div>
Industry is supposed to enhance production and in the process create jobs. But Nepal’s weak industrial development is one of the factors that drove 690,000 Nepalis to go abroad last year.&nbsp;
The lack of industrial growth has meant that Nepal depends largely on the third service sector stage, which makes up almost two-thirds of the nation’s economy.
Nepal’s economic change has been brought about by a lack of meaningful growth in the agricultural and industrial sectors, as well as improvements in Nepal’s service sector.
“But this is only structural change, not a structural transformation needed for radical improvements to the economy,” says economist Dilli Raj Khanal. “For there to be such a transformation, we need to up our productivity in all sectors: agriculture, industry or service.”
The service sector also has inherent risks. While a small number of people involved in the service sector can increase production and add value to the economy, it may not create many jobs.
Moreover, because the service sector mostly involves educated, tech-savvy and business-minded people, its benefits are mostly limited to their circles, increasing socio-economic inequality.&nbsp;
“The service sector yields more products despite fewer people being engaged in it, meanwhile agricultural production is declining &nbsp;despite the involvement of a significant section of the population,” says Khanal. “We must thus find ways to increase both production and income in the agricultural sector.”
In the last three decades, the agricultural sector in Nepal has only grown at the rate of 2.9% annually, while the growth rate of the service sector during the same period has been 6.3%. So while the service sector is expanding, there has been no comparative increase in agricultural production, which in turn means that the income of Nepali farmers has not increased either. That further widens the gap between rich and poor.
<div class="embed-block"><iframe title="The shifting landscape of the economy" aria-label="Interactive area chart" id="datawrapper-chart-8wpWL" src="https://datawrapper.dwcdn.net/8wpWL/1/" scrolling="no" frameborder="0" style="width: 0; min-width: 100% !important; border: none;" height="600" data-external="1"></iframe><script type="text/javascript">!function(){"use strict";window.addEventListener("message",(function(a){if(void 0!==a.data["datawrapper-height"]){var e=document.querySelectorAll("iframe");for(var t in a.data["datawrapper-height"])for(var r=0;r<e.length;r++)if(e[r].contentWindow===a.source){var i=a.data["datawrapper-height"][t]+"px";e[r].style.height=i}}}))}(); </script></div>
A 1% growth in the agricultural sector plays an equal role in reducing poverty as a 6% growth in the service sector. Says economist Biswo Poudel, professor at Kathmandu University: &nbsp;“Farmers directly benefit from agricultural reform, but an economy boosted by the service sector does not reach those communities.”
The average annual per capita income of Nepalis is $1,434 compared to $824 ten years ago. Despite this, the benefits have not been equally spread across communities. Those involved in the service industry, which has contributed to economic growth, have reaped the rewards. Farmers have just not enjoyed similar profits.&nbsp;
“As it is, there is little possibility for expansion in the agricultural sector because we can neither increase the arable land nor productivity,” notes Hem Raj Regmi at the National Statistics Office.
It is not that newer ventures have not been launched in the last decade. For instance, while the banking and insurance sector contributed less than 3% to Nepal’s economy 20 years ago, it now makes up 7% of the economy.
Similarly, the share of the administrative sector has gone from 2% to 10% in the last 2 decades. But the share of the manufacturing and industry in the economy has fallen below 5% as compared to 9% two decades ago.&nbsp;
Economist Poudel argues that increased agricultural production can lead to further economic growth in Nepal, provided there is an expansion of irrigation and transfer of agricultural technology.
There are almost 2.27 million hectares of irrigable land in Nepal, out of which 800,000 hectares do not have irrigation. Moreover, only one-third of the over 1.4 million hectares of land that have such facilities remain irrigated year-round. The rest are rain-fed fields.
“The greatest challenge Nepal faces is to create jobs in the agriculture sector as well as ensure a decent income,” says Regmi of the National Statistics Office.

Nepal economy shifts away from farming

For Prime Minister Pushpa Kamal Dahal the past week has been eventful in more ways than one. His Home Minister Rabi Lamichhane’s troubles is shaking the coalition, and there are rumours of the NC and the UML in talks. By-elections in Ilam and Bajhang are set to become a referendum on legacy parties.&nbsp;
In the midst of all this, there was the overnight state visit of the emir of Qatar which was so epic the government declared a national holiday. Qatar and Nepal signed a commerce agreement, and to sweeten the deal the emir was gifted two elephants.&nbsp;
The Qatari visit set the stage for the third Nepal Investment Summit on 28-29 April that will showcase 150 projects for potential investors, including schemes for hydropower, transport, tourism, and agriculture.
Previous investment summits in 2017 and 2019 pledged $13.5 billion and $17 billion respectively, of which not much ever materialised. This time, the investment climate is worse because of political instability, too few laws, and too much red tape. &nbsp;
“The state of Nepal’s economy, combined with bureaucratic hurdles and the challenges faced by foreign investors in land and resource acquisition, has made attracting FDI difficult,” says Pushkar Bajracharya, formerly of &nbsp;the National Planning Commission.&nbsp;
Read also: <a href="https://nepalitimes.com/opinion/comment/nepal-looks-at-alternative-investments">Nepal looks at alternative investments</a>, Siddhant Raj Pandey
The same woes from the last two investment summits persist. Nepal has had three coalition governments in the last two years, banks are flush with cash because no one is borrowing, &nbsp;and there is a mass exodus of skilled Nepalis.&nbsp;
“Lack of political stability results in policy instability,” explains economist Posh Raj Pandey. “This is why Nepal’s FDI has not lived up to commitments. Potential investors have decided that internal risk factors outweigh any business opportunities.”&nbsp;
Everyone went to sleep after the last investment summit, and there was little preparation for this hurriedly planned one. Nepal’s private sector has long urged the government to amend laws to improve the investment climate. The government did amend nine out of dozens of laws, but through ordinance on Tuesday. &nbsp;
“What kind of message are we sending to internationals when we amend laws through ordinance rather than Parliament?" asks Pandey. “Amendment will not inspire confidence unless they are put into practice, which we historically have not done.”
Read also: <a href="https://nepalitimes.com/editorial/invest-in-investment">Invest in investment</a>, Nepali Times
While some experts think ordinances speed things up, they admit most legal changes brought to address Nepal's investment environment have been ad hoc and limited to paper.
Forget foreign investors, even domestic businesses face obstacles and corruption. Nepal’s internet service providers (ISPs) and the Nepal Telecommunication Authority are on the warpath.&nbsp;
ISPs have been unable to pay Indian firms that provide &nbsp;bandwidth after the government refused to provide them with INR, citing unpaid royalties and taxes.
Such stonewalling is present in just about every sector, dissuading investors in IT, banking and the service industry. Most investors are in natural resource extraction, which has little value added.&nbsp;
Read also: <a href="https://nepalitimes.com/editorial/invest-in-investment">Invest in investment</a>, Nepali Times
This time the government is &nbsp;giving investors a shopping list that includes 18 hydropower projects and 19 transport schemes.&nbsp;
“While hydropower may create short-term jobs, efficiency-seeking investment in the manufacturing, agricultural, and other sectors will create more long-term opportunities for Nepalis, and will be in our best interest,” says Pandey. &nbsp;&nbsp;
Although the summit will have attendees from over 50 countries, most potential investors are from India and China.
“Current investment summits seem to be guided by India and China’s vested interest in Nepal rather than the market and economic possibilities here,” notes Bajracharya. However, Nepal can leverage its proximity to hitch its wagons to these two giant locomotives.&nbsp;
Adds Bajracharya “Our long-term prospects look good, because India and China are set to overtake the US as the world's biggest economies over the next few years, which will attract investors from elsewhere. Our immediate goal must be to first create a conducive investment climate. After that, investments will come.” &nbsp;
Read also: <a href="https://nepalitimes.com/opinion/killing-investment-in-nepal-in-10-easy-steps">Killing investment in Nepal in 10 easy steps</a>, Dibesh Karmacharya

Shristi Karki

Why invest in Nepal?

In the run-up to the third Nepal Investment Summit this weekend, there have been seminars, conferences and workshops where the discourse has revolved around the economy and the investment climate.
The consensus that Nepal needs foreign direct investments (FDI) to grow was repeated, and the familiar litany of reasons about why it has not been able to was discussed.&nbsp;
Policy advocates and regulators have understood that the lack of urgency is compounded by procedural inconsistencies, on top of the already deficient investment environment in the country.
It is a welcome change from what used to be flippantly accepting matters as given. There now seems to be a sense of urgency, with procedural inconsistencies and lack of harmonisation between various Acts and regulations openly discussed.&nbsp;
Government stakeholders also appear more willing to learn and attempt to be part of the solution. Whatever policy changes have been introduced in the past have been piecemeal and address the few rather than the entire industry. This left dual regulatory approaches aimed at similar players.&nbsp;
Read also: <a href="https://nepalitimes.com/opinion/killing-investment-in-nepal-in-10-easy-steps">Killing investment in Nepal in 10 easy steps</a>, Dibesh Karmacharya
This time, unlike in the past two Summits, the government seems to be committed to amending 9 Acts, a positive step towards showing commitment to change. However, the deadline to do so during the winter session of Parliament is over. The option mooted has been to have it passed through ordinance, a lesser appealing step; albeit, a positive one moving forward.&nbsp;
To attract FDI in a competitive global market means that Nepal has to demonstrate that it is serious about bringing in investments with a more consultative and collaborative approach with investors. A departure from procedural to a result-oriented focus is needed.&nbsp;
To put issues in perspective, Nepal needs US$20 billion in investments to meet the UN’s Sustainable Development Goals (SDG) targets by 2030. If net-zero decarbonisation targets are to be met by 2045, another US$7 billion will be required annually.&nbsp;
Looking at our investment history and poor government capital expenditure, the gap is long and wide. In fiscal year 2022-23 Nepal booked a lamentable ~$59 million in FDI (equity). Nepal is in fact the lowest market in South Asia for FDI with 0.3% of the regional average.&nbsp;
What is it that we can do to fill the gap?&nbsp;
First, we need to move away from the notion that Nepal only needs large investments. This has proven to be a mistake, and time series data have proven that smaller investments, in aggregate, make a larger impact on economies.&nbsp;
Read also: <a href="https://nepalitimes.com/news/poor-cash-rich-nepal">Poor cash-rich Nepal</a>, Sonia Awale
We talk about an ‘enabling environment’ but without the right tools. We place restrictions on interest on debt ceiling (SOFR +5.5), without risk premium adjustments, we do not have an active secondary market for bond trading, nor do we have a yield curve, an integral part of the bond market, which is inhibiting us from tapping into the trillion dollar green bond market.&nbsp;
In order to attract green financing, Nepal needs to develop its bond market. Sovereign risk rating has been mooted and was expected to be operationalised before the Investment Summit.&nbsp;
However, to be rated in an adverse economic environment could further deteriorate investment potential due to a lesser-than-expected rating.&nbsp;
Hedging is another instrument that needs further research on. A commercial bank last year showcased the first risk-hedging mechanism for an investment of $8 million. This can be the beginning to expand on its modality. &nbsp;
Subordinated debt instruments have been introduced, but on a special nod basis, this now needs to be institutionalised as it is the most applicable form of investment after equity in a market that has volatile forex reserves.&nbsp;
Read also: <a href="https://nepalitimes.com/editorial/invest-in-investment">Invest in investment</a>, Nepali Times
Viability Gap Funding has been introduced by multilateral development agencies implemented in solar installations. It is a tool to incentivise the private sector to invest in projects that are not financially lucrative initially, but have potential for profitability in the long run. This needs to be scaled up and replicated in sectors like infrastructure, where returns may not be immediate.
Moving forward, to attract FDI, Nepal needs to tap into the funds that are available for the growth of small and medium enterprises (SMEs) and climate change. Alternative investments such as Private Equity Venture Capital (PEVC) have been around in a structured manner in Nepal for nearly a decade now.
These funds have blended finance components and have attracted climate funding as well. PEVC is a new asset class and can address the issues of penetrating into SME financing by incorporating environment, social and governance issues into their investment process.&nbsp;
SMEs are the backbone of any economy, PEVC comes with the ability not only to scale up the enterprise with risk capital, but with the ability to bring technical knowhow to enhance not only the enterprise but also the entrepreneur.&nbsp;
Read also: <a href="https://nepalitimes.com/opinion/success-in-nepal-means-not-having-to-work">Success in Nepal means not having to work</a>, Anil Chitrakar
A differentiator from all other forms of financing available till date in Nepal. Blended finance is a way of de-risking investments, especially in frontier markets. Business Oxygen (BO2) is an example of blended finance with subordinated debt investments of IFC (World Bank Group) taking the lead and Climate Investment Funds along with FCDO as co-investors.&nbsp;
On a larger scale, the 216MW Upper Trisuli 1 is another example of blended finance with IFC, a Korean consortium and local investments. So far, we see that development finance Institutions have been taking the lead in Nepal as their risk appetite is greater than commercial investors and they are eager to help develop the financial markets.&nbsp;
In order to be sustainable, we need to step on this and attract commercial capital from all over the world. To do this there has to be political will to make that pivot.&nbsp;
Instead of being a means to an end, the two previous Investment Summits turned out to be intermittent and cosmetic, providing hardly any results. The third one’s success will depend on how the event will be implemented as a platform for continuous marketing for the country and facilitation for investors in future.&nbsp;
Nepal has outdone many countries in its macro-economic indicators, with sound forex reserves and a stellar history of debt payments to its creditors. This story needs to be propagated along with the drive for change to attract potential investors.
Read also: <a href="https://nepalitimes.com/opinion/comment/alternative-investments-to-attract-fdi">Alternative investments to attract FDI</a>, Siddhant Raj Pandey

Siddhant Raj Pandey

Nepal looks at alternative investments

Nepal is not poor, it is just poorly governed. At no time has this been more true than today.
<a href="https://nepalitimes.com/business/remittances-up-and-up">A spurt in remittances</a> and a slowdown in imports has meant that Nepal’s foreign exchange reserves have hit an all-time high of $14 billion. Just in the past seven months, diaspora dollars totalled $6.35 billion – a 21.6% increase over the same period last year. The trade deficit has declined, and the balance of payments situation is improving.
So why are we not celebrating? The problem is that while the macroeconomy is on a firm footing, the same statistics also point to a deep malaise within. Imports are down because purchasing power has declined, and banks are not lending, this means government revenue has also fallen drastically. Most remittance money is spent on household expenditure, much of it again to pay for imports.&nbsp;
All this means <a href="https://nepalitimes.com/opinion/killing-investment-in-nepal-in-10-easy-steps">investment</a> fell by 11% in 2023 after growing by nearly 4% the year before. Tighter financing conditions post-Covid and global factors following the Ukraine war have impacted both public and private investment.&nbsp;
“Nepal’s economy grew at 1.9% fiscal year 2023. Is that too low? Yes, very low. Are we in an economic crisis? No. But we are stuck in a situation where aggregate demand is low. Nepal is in a crisis of low economic growth,” says economist Sameer Khatiwada.
Indeed, banks have money to lend and borrowing rates have gone down, but there is no demand from the private sector because a large chunk of the middle class has<a href="https://nepalitimes.com/editorial/brain-drain-into-brain-gain"> left the country</a>.
And that is the irony: Nepalis are migrating abroad in droves, but fewer consumers back home means less economic activity, which in turn pushes more people out. Nearly a million young Nepalis left for jobs and study overseas last year. More than 400,000 left on work permits in the first seven months of this fiscal year. Some 3,000 leave every day.
The economy could pick up in 2024 and 2025, with increased demand, increased <a href="https://nepalitimes.com/news/blueprint-for-nepal-india-electricity-trade">hydropower</a> output, and rising tourist arrivals. But sustaining growth year-on-year relying solely on remittance and hydropower is not possible.&nbsp;
Remittances were the main reason for poverty reduction, raising living standards, improving access to health, nutrition and education. Nepal is set to graduate from LDC status by 2025.
Nepal’s economy is suffering a form of ‘Dutch Disease’ where high income from one source paradoxically keeps other sectors of the economy down. Remittance growth has increased savings, but there is nowhere to invest it except to speculate on the real estate bubble, which has burst.&nbsp;
Economist Khatiwada says we have to go beyond the symptoms to the disease: “Nepal is caught in a trap of low productive capacity, lack of competitiveness, lack of foreign investment and lack of business dynamism.”
So, what is the way out? Experts recommend more competition in the private sector and promoting industrialisation by leveraging areas where Nepal has a comparative advantage like the service sector, <a href="https://nepalitimes.com/news/it-is-it">information technology</a> and exports of high-value niche products.&nbsp;
“We were complaining when our foreign exchange reserves were low, and now we are complaining when reserves hit the roof. Our biggest problem is that we are sitting on all that money instead of investing it,” says Sujeev Shakya of the Nepal Economic Forum.&nbsp;
He adds: “We have to allow Nepali companies to invest outside, and reap the low-hanging fruits like energy and ICT. Nepal exported $900 million worth of software last year.”&nbsp;
If there was some hope the change in the coalition government last week would bring solutions, those have fizzled. Finance Minister Barsaman Pun is Prime Minister Dahal’s left-hand man and Dahal’s disagreement with former coalition partner Sher Bahadur Deuba of the Nepali Congress to sack its finance minister Prakash Sharan Mahat was one reason behind the Maoists switching to the UML.
Finance Minister Pun is already under a cloud for <a href="https://nepalitimes.com/editorial/skeletons-in-the-cabinet-k5x6py1v">his alleged involvement with a gold smuggling ring</a>, and he has reportedly been brought in with the express purpose of passing a budget that would be favourable to cronies. There are indications he will raise taxes on certain brands of electric vehicles, ostensibly to increase government revenue.&nbsp;
With the new government’s priorities so centred on personal and partisan gain, there is little time to solve the other crisis: underspending of the development budget. There is money for infrastructure and service delivery, we just cannot seem to spend it. Only 25% of the annual development budget has been spent in the past seven months of this fiscal year.
Delays in infrastructure and connectivity have further undermined economic growth and job creation.&nbsp;
Underspending is directly related to corruption. Public procurement is lubricated by kickbacks, and delays are caused by rival cronies with <a href="https://nepalitimes.com/editorial/need-and-greed">political patronage</a>. The focus is on low-cost bidder and not on the technical quality of bids. Contractors abandon half-finished projects by bribing officials.&nbsp;
In short, Nepal’s crisis of low economic activity is directly related to governance failure and lack of accountability of high elected officials. The new coalition has a chance to set things right at the third Nepal Investment Summit on 28-29 April in Kathmandu. But experts do not pin much hope on it. &nbsp;
“No matter how many laws and regulations we revise to make doing business easier in Nepal, unless we have better infrastructure we will not be able to attract foreign investors to Nepal. Second, soft infrastructure such as skills and quality of the workforce is also a critical ‘pull’ factor,” says Khatiwada.&nbsp;
Shakya takes a broader view: “It all really comes down to our mindset. We think of Nepal as a small, poor country but it is a potential $100 billion economy. We must have that imagination, must take risks, reform how we do business, break away from commission-oriented, rent-seeking approach.”

Poor cash-rich Nepal

This tipper truck (above) was washed down by a flash flood on the Sabha Khola on 19 June as the first monsoon squalls lashed eastern Nepal. It showed increasing risk to infrastructure projects from climate-induced extreme weather, especially on rivers with cascade hydropower projects.
But the spectacle of a truck lying half-submerged on its side was also emblematic of the sorry state of the Nepali state. The fake refugee scandal exposed corruption in high places and how it has hollowed out the country from within (Editorial). Impunity is so rife that a ruling party absolves its vanguard students for maiming university officials. Murderers go scot-free to keep the ruling coalition intact.
A populist mayor oversteps his brief to reclaim Nepal’s pre-1816 boundaries and concurrently declares war on Bollywood for a non-existent dialogue so as to distract public attention from failures to address more pressing everyday issues faced by citizens. He then weaponises social media to silence critics. Ultra-nationalism is the last resort of scoundrels.
Read also: <a href="https://www.nepalitimes.com/news/till-debt-do-us-part">Till debt do us part</a>, Ramesh Kumar
The truck is also symbolic of the shambolic state of the economy. Commentators cried wolf earlier this year warning that Nepal was going the way of Sri Lanka despite evidence to the contrary. In fact, Nepal’s macroeconomic state is now quite robust with foreign exchange reserves enough to pay for 11 months of imports, and remittance inflows hitting record levels. 
Reserves increased because of last year’s import curbs. But solving one crisis created a bigger one: reducing imports also brought down tax revenue. Without that revenue, the government has much less money for capital investment and most of the available cash is spent on recurrent expenditure.
Finance Minister Prakash Sharan Mahat’s budget is problematic at many levels, and even the NC’s coalition partners have sworn not to pass it because of perceived favouritism to some districts. He slashed the import tax on certain types of LPG cylinders to appease two gas companies, and raised taxes on electric public transport and cheaper battery vehicles. 
Read also: <a href="https://www.nepalitimes.com/here-now/nepal-s-tax-system-widens-rich-poor-gap">Nepal’s tax system widens rich-poor gap</a>, Ramesh Kumar
Prime Minister Pushpa Kamal Dahal in Delhi signed a deal for two new oil pipelines to import petroleum from India. The commitments Nepal’s rulers have made at climate conferences is just greenwash. 
But perhaps the most egregious item in the budget is a provision to retroactively tax FPOs and other profits from mergers, stock and property transactions. Banks and businesses are up in arms and have met the prime minister, finance minister and other officials saying it will kill foreign investment at a time when the economy is already a wreck.
“This does not happen anywhere else in the world,” said one banker who was in a delegation to meet officials, but did not want to be named. “The government is so desperate for revenue so it has money to splurge on wasteful things that it is taxing everything left, right and centre.”
Read also: <a href="https://www.nepalitimes.com/editorial/institutionalised-inequality">Institutionalised inequality</a>, Editorial
Finance Minister Mahat has refused to budge, saying the budget is written in stone, and reportedly told businesses which had gone to see him that they could always go to the courts to challenge it. 
With cooperatives folding, banks in crisis, and the government cash-strapped, one would have thought that Prime Minister Dahal’s government would be busy addressing the economic crisis. But by visiting shrines, his message seems to be: “Only Pashupatinath can protect us now.”
Read also: <a href="https://www.nepalitimes.com/here-now/state-sponsored-economic-crisis-ikcxxmnp">State-sponsored economic crisis</a>, Ramesh Kumar

Kunda Dixit

State of the state

A lot of the discussion on the new budget has hinged on taxes. But the fact that it allocated more money for debt servicing than for capital expenditure is a much more stark indication of the state of the economy.&nbsp;
The government earmarked Rs331 billion to pay back domestic and external loans and interests, higher than Rs320 billion set aside for capital expenditure. In essence, this means there will be less money for health, education, or infrastructure.&nbsp;
In fact, the government plans to borrow Rs240 billion in internal loans, but will be spending over Rs275.79 billion paying off old debt.
With falling tax revenue unable to cover expenses, more than a quarter of the budget is now borrowed from outside and within the country. Public debt as a proportion of GDP before the earthquake was 22%, now it has exceeded 42%.&nbsp;
Read also: <a href="https://www.nepalitimes.com/here-now/nepal-s-tax-system-widens-rich-poor-gap">Nepal’s tax system widens rich-poor gap</a>, Ramesh Kumar
“We are falling into a domestic debt trap, we have reached a point where we are having to borrow more money to pay our debt,” warned former finance minister Yubaraj Khatiwada. “Alternatively, the government’s capacity to spend on development is now weaker.”
According to the Public Debt Management Office, Nepal’s total public debt has exceeded Rs2.15 trillion. Of this, domestic debt is Rs1.08 trillion and the other half is foreign loans. In 2015, domestic debt as a proportion of GDP was 8.1% and foreign debt was 14.2%. By the end of December 2022, this ratio increased to 19.9% and 22.7% respectively.&nbsp;
Government housing grants post 2015 earthquakes, implementation of financial mechanisms within the federal system including building of new infrastructure, and the Covid-19 pandemic have been blamed for the increase in public debt. Wanton expenditure by successive ruling parties has also played a hand.&nbsp;
“The expenditure will increase now that the internal bonds taken by the government have matured and the repayment period has started,” says Finance Ministry spokesperson Dhaniram Sharma. During the pandemic, the government had requested donors to postpone loan repayment period by a few years. We have now passed that grace period.&nbsp;
Read also: <a href="https://www.nepalitimes.com/editorial/institutionalised-inequality">Institutionalised inequality</a>, Editorial
On the other hand, the government has started to raise more domestic debt through development bonds since 2018/19. This will lead to an increase in the amount earmarked for interest and capital repayment, further diverting resources from development. &nbsp;
In the financial year 2022/23, the government allotted Rs.609 billion for development and Rs.188 billion for the payment of interest on loans. This fiscal year, the development budget has shrunk by 23%, while debt repayment increased by a whopping 76%.&nbsp;
“Because all of this is costing the government more money, it is raising the debt of the market. Now what this does is create a situation where only a few in the private sector can manage to get loans,” says Khatiwada.
Foreign loans from donor countries, agencies and multilateral organisations are concessional in nature, meaning they have an affordable interest rate of less than 1%. Many of these loans have a repayment period of up to 40 years. For example, the government has taken a loan of about Rs16 billion from the Japanese government to build the Nagdhunga tunnel. The interest rate of such a loan taken for 40 years is only 0.01%
Read also: <a href="https://www.nepalitimes.com/?p=21822&amp;preview=true" target="_blank">Some are more equal than others</a>, Anil Chitrakar
However, internal borrowing is expensive. As soon as the interest rate of loans of banks and financial institutions increases, the government also has to borrow more expensively. According to the Public Debt Management Office, the average interest rate on bonds is 10.30%, up from 5.75% in 2017, primarily due to the lack of investable funds in the financial system.
“Internal debt is an invisible tax imposed on the common man. As the internal debt increases, the government starts looking for ways to generate income to pay it. As a result, taxes are added to goods and services used by citizens,” says former secretary at the Finance Ministry Rameshore Khanal.
But in addition to paying off instalments of the old loans, the Finance Ministry is also under pressure to increase salaries, social security allowances and other expenditure obligations. As such, the government has started imposing higher tax rates to increase its income. Nepal is already one of the countries with the highest tax rates in South Asia. Revenue makes up 22% of Nepal’s GDP.&nbsp;
More than half of the country’s annual budget is being spent on salaries, administrative expenses, social security, subsidies, etc., so the government relies on debt to raise resources for development. Large budget and distribution-oriented programs in turn have further increased the internal debt. Experts say loans should be taken only for priority areas and for productive sectors that can repay the amount.&nbsp;
Says economist Pushkar Bajracharya: “Otherwise, taking out loans and spending them indiscriminately will only further burden the future generation of our people.” &nbsp;
Read also: <a href="https://www.nepalitimes.com/here-now/state-sponsored-economic-crisis-ikcxxmnp">State-sponsored economic crisis</a>, Ramesh Kumar

Till debt do us part

It is that time of the year again. The last-minute construction spree is underway to make up for chronic underspending of capital expenditure, right ahead of the new budget to be presented in Parliament on 29 May. The paradox is that while the government faces a severe cash crunch due to falling revenue, it spent only one-third of the development budget in the last 10 months of the fiscal year.&nbsp; The new parties in Parliament like the RSP have been trying to shake things up and urge multi-partisan consultations before the budget, but given the obsolete structure and leadership of the parties, not much is expected to change. But there is a strong argument for tax reform since the government faces a major challenge in balancing revenue with expenditure. The previous government’s ban on luxury items to augment depleting foreign reserves post-pandemic and increased bank interest led to the decline of real estate transactions resulting directly in a drop in revenue. But what makes matters worse is that the government has been profligate in spending beyond its means. Salaries, allowances, administrative expenses, grants and loans have all gone up. The government collected Rs756 billion in revenue in the last 10 months against the target of Rs1.4 trillion whereas its expenditure has exceeded Rs1.04 trillion.&nbsp; Read also: <a href="https://www.nepalitimes.com/editorial/institutionalised-inequality">Institutionalised inequality</a>, Editorial Taxation is the primary source of income for any government. Contrary to what the wealthiest Nepalis think, the government is not run with their tax money but by what ordinary citizens pay in taxes. &nbsp;While tax evasion concentrates the wealth within the already privileged, the tax the poor pay is not proportional to their earnings. &nbsp; Nepal’s liberal economic policy since 1990 was expected to alleviate the income gap with trickle down effect, but the economic disparity in society is more stark than ever. A 2020 report Equality for Prosperity showed that while the wealthiest 20% of Nepalis own 56.2% of wealth, the poor 20% have only 4.1%. This economic gap is likely to have widened with the current crisis.&nbsp; This income gap is not just in Nepal. Worldwide, a skewed tax system is blamed for rising inequality. A new Oxfam report points out that two-thirds of the wealth that has increased globally after the Covid-19 pandemic is in the hands of the richest 1%. It recommends tax reforms based on wealth accumulation. “Because the tax system is not progressive in Nepal, wealth is piling up in the hands of the rich, while the income of the poor is not increasing,” explains economist Dilliraj Khanal. “We don't have a system of taxing the rich because of policy weakness and dominance of middlemen.”&nbsp; Read also: <a href="https://www.nepalitimes.com/opinion/nepals-care-economy">Nepal's care economy</a>, Bina Pradhan  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230526050528_6fe0c49de563e6fb210c25501e835186d93ecd57b2f63f8ff8154dca49daeee7.png" data-media-id="editor_2" data-image-id="20230526050528_6fe0c49de563e6fb210c25501e835186d93ecd57b2f63f8ff8154dca49daeee7" data-rendition-name="original" width="741" height="541" loading="lazy" alt="Rich-poor gap graph"> </figure>  Who pays taxes? Two-thirds of the government's annual revenue is collected not from corporations and industry, but from various taxes and revenue paid by the general public. The share of tax on corporate profit is in fact very small.&nbsp; In fiscal year 2021/22, the government collected a total of Rs989.62 billion in revenue. Of this, the income tax paid by businesses from the profits earned through private companies is only 5%. So while income tax did bring in Rs229 billion which is 24% of total revenue collected, this amount is largely from the income tax paid by ordinary citizens on their personal income. The tax paid from the profits of private companies is only Rs47.5 billion. When adding public limited companies (issued shares to the general public) and other types of companies, corporate income tax comes to only about Rs114 billion,which is just 11% of the government’s annual revenue.&nbsp; The government collected Rs314 billion from VAT last year, and this made up about one-third of total government revenue. Similarly, Rs241 billion was collected as customs duty and Rs155 billion as excise. “Society with unequal income and wealth, but equal taxes, burdens the poor and favours the rich, it is a regressive tax system that makes it difficult for the poor to survive,” says Khanal. For example, VAT is the same 13% for all Nepalis – rich and poor. &nbsp; “In essence, five-star hotels in Kathmandu and the poor are both taxed equally for LPG fuel,” he adds. “From a social justice standpoint, taxes must be based on income.” Read also: <a href="https://www.nepalitimes.com/here-now/ground-reality-of-landlessness-in-nepal/" target="_blank">Ground reality of landlessness in Nepal</a>, Rabi Giri Taxation expert Roop Khadka disagrees, saying it is impractical to have a different VAT rate for rich and poor, and even if it was introduced it would be impossible to enforce. Instead, Khadka favours revoking VAT exemption on goods and services consumed by the upper classes, which are worth nearly Rs100 billion per year. Tax evasion by the rich is another problem that needs to be tightened, and collusion between business and politicians means that the government itself abets tax evasion. Real estate speculation has helped select groups in Nepal to become immensely rich immediately, but the government collects a bare minimum in tax from profits made in land transactions. &nbsp; A real estate sale within five years is required to pay 7% of its profit. If the transition happens within 10 years, only 5% of the profit is taxed. This means most of the astronomical profits made in real estate sales in the past years have gone into the pockets of brokers and large landowners. On the other hand, the 60th report of the Auditor General's Office says many evade tax by showing less than the actual value of the property. The VAT bill scandal 10 years ago also revealed the widespread tax evasion by the commercial sector. The politics of patronage means that businesses are now colluding with politicians and bureaucrats to loot the treasury. The Tax Settlement Commission decided to collect Rs9.54 billion from businesses that have not paid tax for a long time, but the Auditor General's Office later revealed that the decision was made in cahoots with the businesses themselves who actually needed to pay Rs30.52 billion. The most egregious and blatant wrongdoing was by former Finance Minister Janardhan Sharma who was making backroom deals with select business groups importing steel rods and electric vehicles so their products got customised tax breaks in the budget last year. The deal cost Sharma his ministership but the unholy nexus between politicians and business continues with impunity.&nbsp; Read also: <a href="https://www.nepalitimes.com/here-now/state-sponsored-economic-crisis-ikcxxmnp">State-sponsored economic crisis</a>, Ramesh Kumar  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20230526050528_60a9385914649170d0496b8864bcb751477820b43554c68bec524f6e2412d39b.jpg" data-media-id="editor_5" data-image-id="20230526050528_60a9385914649170d0496b8864bcb751477820b43554c68bec524f6e2412d39b" data-rendition-name="original" width="6124" height="4082" loading="lazy" alt="Kathmandu labourer NT"> <figcaption>Photo: SUMAN NEPALI</figcaption> </figure>  Alternative to the wealth tax In this state, the only sector keeping Nepal’s economy afloat is the estimated $9 billion Nepalis abroad send home every year. Still, Nepal’s debt has reached 43% of GDP, a sharp rise from 28% a decade ago. This will have a direct impact on the tax system. Sooner or later, the government will raise taxes. But for whom?&nbsp; If the status quo continues, and the poor are subjected to more taxes the income gap will widen further, inviting social unrest. Taxation relative to the size of the economy is about 22% in Nepal, one of the highest in South Asia. But for every Rs100 the government receives as revenue, only Rs23 is collected through income tax. The rest is made up of common citizens paying for the consumption of goods and services.&nbsp; All over the world, different levels of income are distinguished and income tax exemption is given to the lowest which is known as a basic exemption. Welfare states also have a weighted system of taxes of the richest that ensures socio-economic equality. But even though there is a flat tax on salary and allowances, windfall profits including from real estate transactions are not taxed properly, leading to a consolidation of wealth among certain groups. Read also: <a href="https://www.nepalitimes.com/banner/nepals-great-income-divide">Nepal's great income divide</a> Experts have proposed wealth-based taxation to reduce the disparity between rich and poor. Economist Keshab Acharya says that the government should levy an inheritance tax on ancestral property to children as is done in the US, Japan and Europe. This encourages entrepreneurship and inspires the new generation to find creative ways to earn money. But the historical distribution of land in Nepal was largely unfair where families close to the ruling class were granted ownership exempt from tax. These assets have been handed down through generations and ownership of a large part of it is still limited to certain families.&nbsp; Historian Mahesh Chandra Regmi in his book Land Ownership in Nepal states that before 1951, more than one-third of the total arable land had been handed down intergenerationally in that manner. An inheritance tax will also reduce corruption because the mentality that wealth should be passed on to children will be weakened if such a tax is implemented. Meanwhile, land prices in Kathmandu skyrocketed thanks to the government. Since the state has spent on infrastructure that led to the rise in value of property, it should get a share of the profits “The government should get the benefit of increased property valuation in the form of taxes which will increase the spending purse for the welfare of the poor,” explains Khanal. Read also: <a href="https://www.nepalitimes.com/?p=21822&amp;preview=true" target="_blank">Some are more equal than others</a>, Anil Chitrakar

Nepal’s tax system widens rich-poor gap

<figure><img width="2316" height="3240" src="https://superdesk-pro-c.s3.amazonaws.com/sd-nepalitimes/20221114111128/637218709c7e80680e0baa41jpeg.jpg" alt=""/><figcaption>Illustration: SWORUP NHASIJU</figcaption></figure>With Nepalis distracted by slow vote-counting, the government sneaked in another petrol price hike to Rs170 per litre last week. Inflation is going up, as the economy goes down. To prevent depletion of foreign exchange reserves, the government restricted imports, but that has hit tax revenue.As local election results come out in slow motion, Nepalis face the hard reality of a full-blown economic crisis. There is animated debate among experts about whether Nepal will be next after Sri Lanka to witness a political upheaval.Sri Lanka’s new Prime Minister Ranil Wickremesinghe has taken over at a difficult time, and has warned that things will get worse before they get better. The country has run out of food, fuel and essentials.Some experts point out that Nepal does not have the heavy debt burden of Sri Lanka and the country’s relative underdevelopment protects it somewhat from global shocks.However, while Nepal’s disease may not yet be as severe as Sri Lanka's, the symptoms are the same. The country’s hard currency reserves can pay only for 6 months of imports. The balance of payments gap is Rs2.68 trillion — the widest ever. Inflation hit 7.28% in April.On top of this are Nepal’s chronic problems, such as the inability to spend the development budget. The market is cash strapped, banks face a liquidity crisis because of loans to unproductive sectors.All this is not sudden. It was decades in the making. Successive governments took the easy way out by selling the sweat of Nepali  workers in the Gulf to buy oil. They failed to invest in manufacturing and agriculture to create jobs at home, and instead ran the country on revenue from taxes on imports.What we see today is a cumulative result of historical governance failure. As these elections have shown, the political parties are stuck in the same cycle of illicit campaign finance leading to corruption and patronage.Few have given priority to raising living standards, creating jobs through sustainable investment, and economic reform. The result is the protest vote going to Balendra (Balen) Shah in Kathmandu, where those who bothered to vote thumbed their noses decisively at the established parties.The politician-bureaucrat-corporate nexus has entrenched rent-seeking and crony capitalism to turn Nepal into a kleptocracy. And instead of fixing structural problems the politico-bureaucracy is going for band-aid interventions.Two-thirds of Nepalis are dependent on agriculture, yet it is farmers who are migrating for work. The biggest expenditure item among Nepal's imports is food.  The reason for this state of affairs is the policy to send Nepalis of productive age abroad, instead of  investing in increased productivity at home.Banks and financial institutions chose to lend in quick-money sectors like import financing and real estate. This made the rich richer, and worsened Nepal's socio-economic inequities.At a time like this, politicians without a clue about the economy are setting policy and making ad hoc decisions. Finance Minister Janardan Sharma sacked the Central Bank Governor Maha Prasad Adhikari in the midst of this crisis.And despite the Supreme Court reinstating him, there is not a peep from Minister Sharma or his boss, Prime Minister Sher Bahadur Deuba.The 5-party coalition is more interested in keeping its unity for forthcoming provincial and federal elections rather than solving the economic emergency.It must re-channel investment to select production-oriented sectors to create jobs. Prioritising agriculture would immediately reduce imports in the next crop cycle. Reforming monetary policy should be at the top of the agenda.These are not medium or long-term goals, they must be done on a war-footing right away. Else we may soon see scenes like ones that unfolded on the streets of Colombo last week in Kathmandu as well.

Election Economy

In the aftermath of the GenZ protests last month, as new PM Sushila Karki chose the first members of her Council of Ministers, youth collectives urged that it reflect the country’s diversity by including women, youth and people from various ethnic and socio-cultural backgrounds.&nbsp;
It took another couple of weeks for Karki to include &nbsp;bureaucrat and public health expert Sangeeta Mishra as &nbsp;Health Minister in her next tranche of ministers. Almost immediately, people dug up a video of Mishra calling herself “Nepali, but a native Indian”.
She was telling it like it was: Mishra is a naturalised Nepali citizen. But there was outrage in the ultra-nationalistic cybersphere. Mishra’s name was withdrawn from the list of ministers, with government officials citing an ongoing investigation at the CIAA.&nbsp;
With her Cabinet still incomplete a month after taking office, Prime Minister Karki was preparing to induct GenZ as ministers. A leak in the media floated the names, one of which was of Tashi Lhazom, a climate activist and filmmaker from Humla’s Limi Valley.&nbsp;
Almost immediately, social media erupted with discriminatory, xenophobic and misogynistic epithets against her: that she supported a separatist movement, that she was a foreign agent, that her citizenship was disputed, that she did not ‘look’ or ‘speak’ like a Nepali.&nbsp;
Political figures like Gyanendra Shahi, a prominent voice calling for the restoration of a Hindu monarchy, added fuel to the fire by making bigoted and false remarks about her heritage.
The former Commissioner of the National Human Rights Commission, Mohna Ansari, wrote on social media that it was shameful to question Lhazom’s identity: ‘Ms Tashi Lhazom is as Nepali as you are. Our society’s ugliest face and biggest flaw is doubting our own. Real patriotism embraces diversity — fake nationalism must end.’
Ansari, a human rights lawyer and activist, has also often been subject to Islamophobic and derogatory comments on digital platforms. &nbsp;
In response, the Indigenous GenZ Collective released Lhazom’s Nepali citizenship certificate to debunk the mistruths spreading on digital as well as mainstream media.
What makes a Nepali? What does a Nepali look or sound like? Who is a Nepali?
‘Had my name been Tashi Poudel, Thapa, Bhattarai or Ghimire, this would not have happened,’ Lhazom said in an interview with Kantipur following an avalanche of bigotry against her. ‘They questioned me because I do not look Nepali, or speak Nepali like a Khas. Because it is not my mother tongue.’
It is an indictment of Nepali society that indigenous Nepalis have to present proof, at the slightest inconvenience of mostly the dominant groups, of being a citizen of this nation simply because they might not fit into an imagined idea of Nepali nationhood by virtue of physical appearance, speech, geography, or faith.
And while we celebrate the successes of Nepal-born naturalised foreign citizens (some now hold elected office in the US) we refuse to afford the same respect to naturalised Nepali citizens, and those born in Nepal to excluded groups, nor do we expect them to work in the national interest if they are given responsibility to govern. And women are singled out twice as much for scrutiny.
Then cyber Nepal went into a tizzy when videos appeared of a biker’s group clad in black t-shirts emblazoned with the acronym ‘TOB’ which was interpreted to stand for ‘Tibetan Original Blood’ and linked to the Free Tibet movement.
The accusations snowballed into disinformation, xenophobia, and even calls for violence against Nepalis of Tibetan heritage and the Tibetan community in Nepal.&nbsp;
In the aftermath of the September protest, the hope was that politics and the bureaucracy would finally be rid of orthodox political actors. But first, we as a nation need to collectively examine the biases and bigotry that exist in Nepal’s socio-cultural space.&nbsp;
Otherwise, Nepal’s multiculturalism will be limited to just words in the Constitution and political tokenism.
No one who is in government now or in future can be expected to be completely free of subjective opinions, ideology, affiliation to a cause, or prior activism. And such criticism falls disproportionately on activists, advocates, and members from underserved and underrepresented communities.&nbsp;
One cannot be apolitical and hope to participate in politics, and as we move forward to rebuild the system it must not just reflect diverse communities, but also celebrate diversity of thought and beliefs.&nbsp;
Resorting to ethnocentrism, racism and chauvinism with conspiracy theories and discriminatory dog-whistling about fellow citizens is a disservice to Nepali nationhood. It is Nepal’s diversity that makes us strong.&nbsp;
Shristi Karki

What makes a Nepali?

We were used to getting stuck in Kathmandu’s notorious traffic with gas fumes and horns blaring. We are still stuck in traffic, but now it is mostly the quiet hum of EVs, and street-level air is noticeably cleaner. Alongside Norway, Nepal has the highest combustion-to-EV conversion rates in the world. And we are not even a middle-income country yet. How did we get here?&nbsp; For the first time in Nepal’s history, 2025 saw an unprecedented turn of events: two back-to-back auto shows a week apart in August, independent of each other. This was timed for the warm up to the Dasain season. &nbsp;&nbsp; The first auto show 6-11 August was the <a href="https://naimanepal.org/mobility-expo" target="_blank">NAIMA Mobility Expo 2025 </a>by the newly established Nepal Automobile Importers and Manufacturers Association which saw 35 new models, many of them EVs with 50 participating brands like Toyota, BYD, Hyundai, Kia, MG, Mahindra, Omoda &amp; Jaecoo, Proton and Leapmotor.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101711108_d8c03f5141f0086814d866543af4d95310f340a7191363e4705aedda8e4b73d0.jpg" data-media-id="editor_1" data-image-id="2025101711108_d8c03f5141f0086814d866543af4d95310f340a7191363e4705aedda8e4b73d0" data-rendition-name="original" width="1770" height="1097" loading="lazy" alt="Electric cars in Nepal NT"> </figure>  The exhibition had a strong focus on two-wheelers aimed at affordable and easy mobility in a town now known for long traffic jams (see report). NAIMA attracted a record 100,000 visitors in six days.&nbsp; The second one was the Nepal Automobile Dealer’s Association Auto Show 2025 (<a href="https://youtu.be/emSd0mUuMjU" target="_blank">NADA</a>) to address the growing demands for cars and two-wheelers. It was a natural expression of new market forces at work, on one hand, and popular taste, on the other — one influencing the other.&nbsp; This year’s NADA Auto Show was its 17th iteration, and carried a hefty legacy: exhibiting a contemporary lineup from manufacturers such as Tata, Suzuki, Xpeng and Nammi, but also classics for vintage car lovers like the 1928 Ford Model A and a rare 1955 Austin Princess Dm4 sedan.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101711108_dda7d264ddb12448cc10d9b1cb699632eee975741fc4c56055e4df904579c34f.jpg" data-media-id="editor_3" data-image-id="2025101711108_dda7d264ddb12448cc10d9b1cb699632eee975741fc4c56055e4df904579c34f" data-rendition-name="original" width="1381" height="848" loading="lazy" alt="Electric cars in Nepal NT"> </figure>  It also showcased the Deepal eVTOL (a 2-seater drone), and a humanoid robot with dog. Curious onlookers at Bhrikuti Mandap thronged the show with footfall crossing 170,000.&nbsp; Earlier this year, I had traveled to attend India's largest auto show, the <a href="https://youtu.be/OgIIvXx6yOM?si=zNmMgklzCJpagTye" target="_blank">Bharat Mobility Global expo</a> in January in New Delhi. It was part of a <a href="https://youtu.be/GT6LBKiJvyg?si=r7YaxahjSAnsIfBY" target="_blank">roadtrip</a> from one capital to another with BYD Nepal on a Dolphin. The journey took three days through Bhairawa and then the Lucknow-Agra Expressway, covering a distance of 1200km one way.&nbsp; The drive through the horrid Narayanghat-Butwal corridor alone was testimony that EVs are no longer fragile and could handle a beating. And while both Nepal's economy pales in comparison to India, it was evident that the private passenger segment is well on its way to electrification. More than 70% of all vehicles sold in Nepal last year were electric. Sales representatives are unanimous: inquiries for EVs are at an all-time high and overshadow demand for ICE (Internal Combustion Engine) vehicles. Besides four-wheelers, a fast-growing proportion of scooters were also electric.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20251017111016_e4cd988ca915ddd283a86d48fac332f22f98ff776b3d22391e10156ad56d7a1a.jpg" data-media-id="editor_6" data-image-id="20251017111016_e4cd988ca915ddd283a86d48fac332f22f98ff776b3d22391e10156ad56d7a1a" data-rendition-name="original" width="1389" height="863" loading="lazy" alt="Electric cars in Nepal"> </figure>  I have spent the last two years <a href="https://youtu.be/256YQa37Ol8?si=Sv1wQ8EdvgMCiTM_" target="_blank">reviewing</a> many of these EVs. The days of batter-powered cars being small toy cars, with sub-par build quality and the range of golf carts have long gone.&nbsp; Fit and finishing in both Chinese and Indian EVs are comparable to established brand names even in Japanese and European markets. But most significantly for us in Nepal, battery technology and range have made inter-city travel on our highways imaginable. The media sometimes portrays Nepal as a prime testing/dumping ground for EVs due to lack of regulation and the proximity to the world’s largest EV exporter (China) and our tough geographical conditions. That is just a part of the story. What actually stands out is the incredible appetite for risk among Nepali buyers.&nbsp; Since the Covid pandemic charging infrastructure has spread across the country. My early trips between Kathmandu and Pokhara saw the possibility of topping up with just one charging gun at the <a href="https://rsr.com.np/" target="_blank">Riverside Springs Resort in Kurintar</a> – and I would have to wait in line, or the charger simply would not be working.&nbsp; These days, by the time I cross Kurintar from Koteswor in my Kona, I will have passed at least 10 charging stations with multiple guns. &nbsp; On my <a href="https://www.youtube.com/@casuallyannoyeddriver" target="_blank">YouTube reviews</a>, people from across the globe ask about range and handling EVs on poor road conditions like ours. The occasional skeptics also leave comments like: ‘If this works in the higher altitudes and mountainous roads of Nepal, then it should be a breeze down here in the flats of Australia and/or hills around Auckland!’  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/20251017111016_8b4fbe59884538849be6428eb2ce9249627a8970ed9ef4cd3c792682bf26dbed.jpg" data-media-id="editor_10" data-image-id="20251017111016_8b4fbe59884538849be6428eb2ce9249627a8970ed9ef4cd3c792682bf26dbed" data-rendition-name="original" width="1139" height="787" loading="lazy" alt="Electric cars in Nepal"> </figure>  SATURATION? However, both the NAIMA and NADA auto show also confirmed that we could be hitting a peak EV. From having just one car in one budget segment, there are now multiple alternatives stretching from the entry of below Rs3 million to the premium and high-end Rs 10 million price point.&nbsp; Furthermore, the price wars on EVs that started in China a year ago have also trickled across to Nepal. Models such as the <a href="https://youtu.be/3wFN2I81Tq0?si=T6L4SAfRpoyNNvYC" target="_blank">MG S5</a>, Nammi Vigo, BYD Atto 2 (and 1) and <a href="https://youtu.be/y214kWbWTc4?si=bIevanDZEPQdkEs4" target="_blank">Deepal S05</a> saw aggressive pricing schemes and discounts that disrupted pre-existing quotas. Consumers can suddenly afford a lot more cars, and travel a lot further for a considerably smaller price tag.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101711108_276afec1bdbd37497572939a4eada4bef74c9d075cd5851892c4dd1985edb9c5.jpg" data-media-id="editor_13" data-image-id="2025101711108_276afec1bdbd37497572939a4eada4bef74c9d075cd5851892c4dd1985edb9c5" data-rendition-name="original" width="1953" height="1107" loading="lazy" alt="Electric cars in Nepal NT"> </figure>  However, booking numbers at both auto shows did not necessarily translate into actual deliveries. The fact remains that almost 80% of registered vehicles in Nepal are still two-wheelers, and GDP per capita stands at just $1500 — among the lowest in the world.&nbsp; This means that early first-adopters are first-time buyers, and the remaining customers in the market are more skeptical and less willing. But there are also those that are unlikely to consider the EV suitable to travel to off-road rural areas. For the average Nepali family, upgrading or purchasing a new car is no small decision. It happens in five years or more with resale values being a big determinant. The EV boom may be reaching saturation.&nbsp; Both NADA and NAIMA shows drove home the message that Nepal’s transport sector is on an electric fast-track, but the road ahead will be bumpy.&nbsp; Soon after the shows, the glacial debris flow on the Bhote Kosi knocked out the Rasuwa-Kerung border with China, and earlier landslides had already blocked the Koradi checkpoint. Manufacturers are now using the less convenient Korala border in Mustang. BYD, Leapmotor and Omoda &amp; Jaecoo have begun rerouting their vehicles to make up for delivery deadlines.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101711108_62fd70a476656062005959c247b38178d8efabf8570c73929295c0a103ff4013.jpg" data-media-id="editor_14" data-image-id="2025101711108_62fd70a476656062005959c247b38178d8efabf8570c73929295c0a103ff4013" data-rendition-name="original" width="1438" height="1031" loading="lazy" alt="Electric cars in Nepal NT"> </figure>  Although the distance from the capital to the Korala border (470km) is four times longer than from Rasuwa (128km) &nbsp;and Tatopani (112km), it is still considered faster and more cost effective than shipping via India using sea routes.&nbsp; And then Nepal was engulfed in turmoil after the youth-led protests of 8-9 September and its aftermath. Many automobile showrooms around Thapathali including Tata, Hyundai and CG were vandalised and torched.&nbsp; Sushila Karki leads a caretaker government till elections are held in March, and the unsettled situation will affect the economy and investment climate as well as the automobile sector. Arnav Upadhyay reviews automobiles and promotes road safety under the handle Casually Annoyed Driver on <a href="https://www.youtube.com/@casuallyannoyeddriver" target="_blank">Youtube</a>, <a href="https://www.tiktok.com/@casuallyannoyeddriver" target="_blank">Tiktok</a> and <a href="https://www.instagram.com/casuallyannoyeddriver/" target="_blank">IG</a>, and this monthly column Drive Line in Nepali Times.

Is Nepal reaching peak EV?

While the streets of Kathmandu were erupting violent GenZ protests that brought down the government, Nepal’s athletes were achieving different kinds of breakthroughs on Spain’s mountain trails and in the cricket qualifiers in the UAE.&nbsp; On 27 September, two weeks after the uprising back home, Nepal's cricket team stunned the sporting world with their first-ever victory against a full member nation — defeating two-time World Cup champions West Indies by 19 runs, then crushing them by 90 runs two days later to seal a historic 2-0 series victory. On that very day, 5,000km away in the Spanish Pyrenees Sunmaya Budha stood on a podium alongside American and European champions, clutching a silver medal from the 3rd World Mountain and Trail Running Championships. No Asian athlete had ever finished this high in the Long Trail competition at the World Championships. While youth back home showed they would not tolerate injustice and could carve their own future, young Nepalis were securing it on the global sports stage even in moments of national crisis.&nbsp; The Long Trail event at the 2025 World Championships was designed to break even the strongest athletes. Stretching 82km through the Spanish Pyrenees, the course features an unrelenting 5,413m of elevation gain and descent.&nbsp; Athletes faced everything from steep scree slopes to narrow ridge lines, from boulder fields requiring scrambling to precipitous descents demanding total concentration. One misstep could mean injury, one lapse in focus could cost precious minutes.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101909108_81152b4754331c4858ed2d0d28204e6a92559faf089fea9ebc84156766ff228a.png" data-media-id="editor_0" data-image-id="2025101909108_81152b4754331c4858ed2d0d28204e6a92559faf089fea9ebc84156766ff228a" data-rendition-name="original" width="977" height="731" loading="lazy" alt="World Mountain and Trail Running Championships"> <figcaption>The Nepal team at the World Championships 2025 with the final four: Sangge Sherpa, Sunmaya Budha, Suman Kulung, Man Kumar Roka Magar. Photo: PREETI KHATTRI</figcaption> </figure>  WOMEN'S COMPETITION Katie Schide (USA) - Winner • Time: 9:57:59 • Average pace: 7:18 per km&nbsp; &nbsp; <a href="https://www.facebook.com/sunmaya.budha.942">Sunmaya Budha </a>(Nepal) - Silver Medal • Time: 10:23:03 • Gap behind winner: 25 minutes and 4 seconds • Average pace: 7:36 per km Most recreational trail runners need 18-24 hours to complete this course, if they can finish it at all. Budha's pace means she was running at a speed that most casual runners could not maintain on a flat course, let alone while constantly climbing and descending mountains. MEN'S COMPETITION Jim Walmsley (USA) - Winner • Time: 8:35:11 • Average pace: 6:17 per kilometer (10:07 per mile) &nbsp; <a href="https://www.facebook.com/runnersumankulung">Suman Kulung (Nepal)</a> - 32nd Place • Time: 10:06:25 • Average pace: 7:24 per km • Finished 1 hour 31 minutes behind the winner • Best performance by an Asian male athlete &nbsp; <a href="https://www.facebook.com/rokamagarmankumar764">Man Kumar Roka Magar (Nepal)</a> - 37th Place • Time: 10:10:53 • Average pace: 7:27 per km • Finished just 4.5 minutes behind Kulung <a href="https://www.facebook.com/Yetimannnnn">Sangge Sherpa (Nepal)</a> - 116th Place • Time: 12:33:09 • Average pace: 9:11 per km  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101909108_2255845b43e68b14d3b111099124f9c98898bbe9016299b9af278aca8b4377f7.png" data-media-id="editor_5" data-image-id="2025101909108_2255845b43e68b14d3b111099124f9c98898bbe9016299b9af278aca8b4377f7" data-rendition-name="original" width="977" height="904" loading="lazy" alt="World Mountain and Trail Running Championships"> <figcaption>Sangge Sherpa organising himself post gear check in Can-Franc.</figcaption> </figure>  The men's winner averaged about 6:17/km on a course where elite mountain runners were struggling. Kulung and Roka Magar maintained a 7:24-7:27/km pace—faster than many recreational runners' easy flat road pace. They were faster than dozens of European athletes who train in the Alps. Even Sherpa's 9:11/km average pace over 12+ hours represents an extraordinary feat of endurance, maintaining forward progress on some of the most challenging mountain terrain in competitive trail running. “What set Budha apart was her exceptional descending ability. She recorded the fastest downhill speed among all women in the competition—a skill honed through years of training on Nepal’s steep mountain trails,” said her team director Ryan S Blair.&nbsp; Sunmaya Budha, ranked world 8th for 100km category events and 17th in the world by the International Trail Running Association (ITRA), entered the race having recently recovered from injuries to both legs.&nbsp;  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101909108_38d8bee04beaa6443480ecf4765e6b34f91d2d105128f292f73702072a820d25.jpg" data-media-id="editor_6" data-image-id="2025101909108_38d8bee04beaa6443480ecf4765e6b34f91d2d105128f292f73702072a820d25" data-rendition-name="original" width="1600" height="1070" loading="lazy" alt="World Mountain and Trail Running Championships"> <figcaption>Sunmaya storming in 2nd position. Photo: WMTRC2025 CANFRAC </figcaption> </figure>  While American Katie Schide dominated from the front, Budha found herself in an intense battle for second place with Italy's Fabiola Conti, a specialised skyrace and mountain marathon runner. The two runners remained locked together through much of the course, running side-by-side at key checkpoints and pushing each other through the mountain wilderness. In ultra-trail racing, where climbs are often win by fractions of minutes, the ability to descend fearlessly and efficiently can make the difference between podium positions. Budha's technical prowess on the descents gave her a advantage over her European competitors. The decisive moment came in the final 20km. At the 65km mark, Budha held a 90-second lead over Conti. By 71.5km she had extended her advantage to eight minutes — a commanding gap she maintained to the finish. In a powerful display of national pride, she approached the finish wrapped in the Nepali flag, showing the world what Himalayan athletes can achieve on the global stage. Said Preeti Khattri, team lead for Nepal: "Standing right beside the USA and European peer. Proud. No Asian athletes have ever made it this far.” MEN, TOO While Budha captured headlines with her silver medal, the performances of Suman Kulung and Man Kumar Roka Magar were equally significant. Both athletes topped Asian athletes and numerous European competitors. Suman Kulung delivered a performance that demonstrated extraordinary mental toughness and racing intelligence. What makes his 32nd place finish even more impressive is that 1.5km he encountered a severe bottleneck on narrow technical trails.&nbsp; This critical delay pushed him back to around 92nd position—a devastating setback in a world championship race where every second counts. Many athletes would have been demoralised by such an early disaster.  <figure> <img src="https://publisher-publish.s3.eu-central-1.amazonaws.com/pb-nepalitimes/swp/asv65r/media/2025101909108_e2f358723ea8abaa262e749a4c6afb0a179cf9f3e0bb4eab1d973e25b9b00f09.png" data-media-id="editor_7" data-image-id="2025101909108_e2f358723ea8abaa262e749a4c6afb0a179cf9f3e0bb4eab1d973e25b9b00f09" data-rendition-name="original" width="668" height="445" loading="lazy" alt="World Mountain and Trail Running Championships"> <figcaption>Suman Kulung coming through 65km Assisted Checkpoint. Photo: DR SIGRID FOUNDATION</figcaption> </figure>  But Kulung showed why he is Nepal's top-ranked trail runner: he launched a spectacular comeback. By the 30km mark, he had charged through the field to reach approximately 20th position — recovering over 70 places in less than 30km.&nbsp; His final time of 10:06:25 placed him ahead of runners from traditional mountain running powers including Switzerland, Austria, and Germany, and was the highest-finishing Asian male athlete in the competition.

nepali-economy

Retrofitting Nepal for future shocks

Farm subsidies: money down the drain

Nepal economy shifts away from farming

Why invest in Nepal?

Nepal looks at alternative investments

Poor cash-rich Nepal

State of the state

Till debt do us part

Nepal’s tax system widens rich-poor gap

Election Economy

Retrofitting Nepal for future shocks

What makes a Nepali?

Is Nepal reaching peak EV?

Nepali runners score breakthroughs