FDI Net Outflow Persists in Nepal – Why Are Investors Withdrawing Capital?

Nepal’s investment climate continues to struggle as foreign direct investment (FDI) recorded a net outflow for yet another period, according to Nepal Rastra Bank’s Balance of Payments (BoP) report for the first month of FY 2025/26. The data shows that while no new FDI inflows were registered, outflows worth Rs. 611 million occurred — indicating that investors are repatriating capital rather than expanding their investments in Nepal.

The persistent negative FDI balance follows similar trends from the past fiscal year, reflecting weak investor confidence, bureaucratic hurdles, and uncertain political conditions. Foreign investors, especially in hydropower, telecommunications, and manufacturing sectors, are reportedly facing delays in project approvals, profit repatriation issues, and inconsistent tax and regulatory policies.

Analysts say Nepal’s FDI stagnation is a symptom of deeper structural challenges. While neighboring countries such as India and Bangladesh have aggressively reformed investment laws and improved the ease of doing business, Nepal’s regulatory environment remains slow, unpredictable, and cumbersome.

Despite policy commitments like the Foreign Investment and Technology Transfer Act (FITTA), the government has failed to provide effective implementation. Rising political instability and frequent changes in leadership have further dampened investor sentiment.

Experts warn that without urgent reforms — such as faster project clearances, tax incentives, infrastructure readiness, and political stability — Nepal risks missing out on regional investment opportunities. Strengthening investor protection and ensuring transparency could help reverse the FDI outflow trend.