चार दशकका सुधारले स्थिरता दिए, रूपान्तरण दिएनन् : राष्ट्र बैंकको अध्ययनFour Decades of Reforms Brought Stability, Not Transformation: NRB Study

Nepal's economy may look stable on the surface, but its inner structure rests on remittances, imports and consumption, leaving the country facing serious long-term challenges to sustainability and productivity, a new Nepal Rastra Bank (NRB) study has warned.

The working paper (No. 63), prepared by NRB Director Dr. Rajan Krishna Pant under the title 'Economic Stability and Central Banking in Nepal: Achievements and Future Direction', reviews the country's economic and financial journey over the past four decades. Its central finding: stability has been achieved, but the goals of productivity growth and structural transformation remain distant.

After weathering a balance of payments crisis in the mid-1980s, Nepal embarked on structural reforms with the support of the International Monetary Fund and the World Bank. Steps ranging from trade liberalization and privatization to financial sector reform and the restructuring of public enterprises followed. While those reforms helped preserve economic stability, the study concludes they failed to deliver the expected shift in the country's production and export structure.

According to the paper, Nepal's long-term average economic growth stands at 4.3 percent. Growth over the past decade has been relatively steady, but its foundation has been remittance-driven consumption rather than domestic production. With consumption accounting for more than 85 percent of gross domestic product, the study finds productive investment and industrial expansion remain weak.

The productivity picture is even more worrying. Nepal's total factor productivity (TFP) ranks among the lowest in the world, and labor productivity in agriculture and industry lags far behind neighboring and peer economies. Despite improvements in energy supply, the paper attributes the stagnation to weak investment in technology adoption, mechanization, research and innovation.

The central bank says the economy is undergoing 'premature deindustrialization' — a shrinking of the industrial sector at an early stage of development. Manufacturing's contribution has been declining steadily, and the sector has failed to play its expected role in creating jobs and expanding exports.

Trade, too, shows a deepening structural imbalance. Imports keep climbing while exports remain flat or weak. With domestic industries unable to meet demand, dependence on foreign suppliers has grown for everything from raw materials to consumer goods, and exports concentrated in a handful of products have left the country's foreign exchange earning base fragile, the study notes.

The paper portrays remittances as a double-edged sword. They have contributed substantially to reducing poverty, building foreign exchange reserves and expanding consumption — yet shocks in overseas labor markets could hit the economy directly. The outflow of workers has deepened manpower shortages in agriculture and industry and dented export competitiveness. Even the notable gains in poverty and inequality, the study finds, stem from remittance-based consumption rather than production growth, leaving many households vulnerable to shocks such as health crises, job losses or natural disasters.

The financial sector, by contrast, has made remarkable progress over the four decades, according to the study. The expansion of bank and financial institution networks, the development of digital payment systems, growing financial access and regulatory reforms have strengthened the system. But challenges are mounting: non-performing loans rose from 1.3 percent in 2022 to 4.62 percent by 2025, and credit demand remains weak despite ample liquidity in the banking system. Weaknesses in the cooperative sector, financial crime, cybersecurity risks and sluggish credit expansion are flagged as the main threats to financial stability.

On the road ahead, the study's message is clear: targeting economic stability alone is no longer enough. It calls for policy reforms centered on productivity growth, industrialization, export expansion, technology adoption and financial risk management — and argues that making the economy sustainable and inclusive requires transforming remittance- and import-based growth into growth driven by production and investment.