Economy Under Pressure as Business Confidence Falls

KATHMANDU, Nov 10

Nepal’s economy is experiencing mounting stress as business confidence dips sharply in the aftermath of the Gen Z protests, slowing credit demand and dampening private sector enthusiasm.

Nearly Rs 1.1 trillion is currently sitting idle in the banking system due to weak loan expansion since the demonstrations. Despite abundant loanable funds, investor caution and declining demand have caused lending activity to stagnate. The protests created widespread uncertainty, raising fears of capital outflow and eroding overall business sentiment.

According to the World Bank’s latest assessment, Nepal’s economic growth is expected to slow to 3.1 percent this fiscal year—down from the earlier projection of 5.2 percent—due to protest-related disruptions and lingering political instability.

FNCCI President Chandra Prasad Dhakal said the private sector suffered immensely during the Gen Z uprising. “Entrepreneurs invest through loans, adjustments, and savings, but private property was attacked during the protests,” he said, noting that businesses, residences, hotels, industries, and offices all faced vandalism.

Dhakal emphasized that the private sector drives 81 percent of Nepal’s economy, provides 86 percent of jobs and contributes over 80 percent of income tax revenue. Losses during the protests are estimated to have reached Rs 88 billion. “When the backbone of the economy weakens, employment and revenue are immediately affected,” he added.

The targeting of major business houses, multinational companies, and five-star hotels has further shaken confidence among domestic and international investors. While internal economic indicators show rising strain, external indicators remain stable for now.

Finance Minister Rameshore Khanal warned that a lack of investment security could jeopardize the survival of industries. Former finance ministers echoed his concerns, saying attacks on entrepreneurs have led many to believe that “nothing can be built here” without accountability. They cautioned that failure to punish arson, looting and vandalism would fuel impunity and heighten the risk of capital flight.

Minister Khanal said the government is committed to rebuilding trust. “Morale is vital for economic recovery. The government and private sector must move forward with renewed determination,” he said, adding that nationwide consultations with business leaders are underway.

Nepal Rastra Bank Governor Dr. Bishwonath Paudel urged entrepreneurs to harness the current monetary environment, citing low interest rates, strong liquidity, and foreign exchange reserves exceeding Rs 2.2 trillion. “This is an opportunity to increase production and employment. Move ahead with confidence,” he said.