Nepal Development Update 2021 by World Bank Group: Key highlights

  • On January 27, 2021, Nepal rolled out its immunization program and managed to vaccinate 5.9 percent of the population in the span of two and a half months.
  • Uncertainties arising from the pandemic combined with political mayhem have brought the economy under considerable strain. Nonetheless, the first half of FY 2021 experienced a modest revival when compared to the last fiscal year, during which the economy shrank by 1.9 percent.
  • The private sector saw a moderate increase of 11.6 percent in bank lending over the first half of FY21 while during the same period there was a salient growth in deposits.
  • Year-on-year reduction of 11.8 percent in imports together with 6.7 percent growth in remittance inflows during the first half of FY 2021 has contracted the current account deficit by 39.6 percent. External soft loans have been the source of deficit financing due to the short supply of foreign direct investment.
  • As a result of higher public spending and reduced revenue generation, there was a 7.4 percent increase in the level of public debt during the first half of FY 2021.
  • The economy is expected to grow by 2.7 percent and 3.9 percent in FY 2021 and FY 2022, respectively, under the best-case scenario.
  • The current account deficit could expand to 3.2 percent of GDP by FY 2022 if the domestic demand were to bounce back to the pre-COVID level, highlighting the need to strengthen the country’s exports.
  • Additional expenditure induced by the pandemic along with low revenue collection will put upward pressure on the fiscal deficit as well as public debt, each of which could potentially amount to 8 percent and 46.7 percent of GDP, respectively, by FY 2022.
  • The surge in unemployment following the pandemic has increased the number of people who are at risk of poverty.

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