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By Dipesh Ghimire

Long-Term Risks Looming Over Nepal’s Capital Market Due to Regulatory Conflict

Long-Term Risks Looming Over Nepal’s Capital Market Due to Regulatory Conflict

The ongoing conflict between regulatory bodies and implementing agencies has led to growing concerns about the long-term risks in Nepal's capital market. The friction between these institutions has significantly affected market stability, and the financial sector is beginning to feel the impact. Banks and financial institutions that have provided loans against shares are now facing increased risk exposure, as the situation remains unresolved. At the same time, investments in productive sectors, such as hydropower, are gradually losing momentum due to the uncertainty caused by this conflict.

The Independent Power Producers’ Association of Nepal (IPPAN) has raised alarms over the potential consequences of the regulatory standoff. IPPAN has warned that if the restrictions on founder shares are not lifted promptly, the government's ambitious goal of generating 28,000 megawatts of electricity within the next decade could be jeopardized. The power sector, which has long been a backbone of Nepal’s development strategy, is now facing additional challenges. The risk of delays in hydropower projects is growing, with investors and stakeholders uncertain about the regulatory framework surrounding these critical industries.

The broader market sentiment is also growing increasingly negative as the financial and capital markets continue to be impacted by this lack of decisive action. The inability to resolve the regulatory deadlock has left the investment community in limbo, with many stakeholders fearing that the delays will ultimately harm the economy. The direct consequence of this indecision is that the general public, as well as institutional investors, are losing confidence in the capital market.

Industry experts have voiced concerns that the regulatory bodies’ arrogance and procrastination are placing undue pressure on the economy. Investors and market participants are increasingly wary, with many questioning whether the capital market will be able to recover from the damage caused by these delays. The lack of clear direction from regulatory authorities has also affected confidence in government initiatives aimed at stimulating economic growth.

As these concerns mount, calls for decisive action are becoming more frequent within the business community. Market analysts and financial experts are urging the government to take immediate steps to address the regulatory issues at hand. The longer this deadlock persists, the higher the risk for the broader economy, especially in key sectors like energy production and finance.

Ultimately, the cost of inaction will likely be borne by the public and the investors who depend on a stable and well-regulated market. The expectation now is that regulatory bodies must move swiftly to resolve the current impasse, ensuring that the capital market and its participants are not left to bear the brunt of this prolonged uncertainty. The coming months will be crucial in determining whether Nepal’s capital market can regain its footing or if it will continue to face long-term challenges due to this unresolved regulatory conflict.

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