Economy to grow by 3.87 per cent, per capita income reaches $1456

The economy is going to grow by only 3.87 per cent at the consumer's price, in the current fiscal year.

According to National Statistics Office (NSO), the gross domestic production (GDP) is estimated to grow by 3.87 per cent despite the government's target of 6 per cent.

The economy will grow by 3.54 per cent at constant price in the current fiscal year, the report launched today reads.

Earlier, the government has projected the economy to grow by 4 per cent, whereas the World Bank (WB) has estimated it to grow by 3.3 per cent, the International Monetary Fund (IMF) by 3.1 per cent and Asian Development Bank (ADB) by 3.6 per cent due to slowdown in the economy.

Nepal’s economy will be the size of Rs 5.704 trillion by the end of the current fiscal year from Rs 5.348 in the last fiscal year, the report reads, adding that the per capita income is also expected to increase by $51 to $1456 in the current fiscal year from last fiscal year's $1405.

The increase in income is too low as Nepal is graduating to Developing Country (DC) status by 2026 from current Least Developed Country (LDC) status.

Due to the contraction in some sectors of the economy and the low capital expenditure has pulled the economic growth rate downwards, the report exposes.

Likewise, the report also shows that the share of service sector in the economy has reached 62.9 per cent. "The contribution of the secondary sector (industry-construction) is 12.5 per cent and the share of the primary sector (agriculture) is 24.6 per cent," it claims, adding that this fiscal year, the contribution of agriculture has increased slightly compared to last year, though the increase in agriculture sector alone cannot push the economic growth upwards.

Agriculture sector will grow by 3.05 per cent, while the non-agriculture sector will grow by 3.75 per cent, it adds.

The industrial sector has also contracted for the second year in a row due to the inability to increase production, according to the report. "This year, the industrial sector has contracted by 1.60 per cent, wheras last year there was a contraction of 1.98 per cent."

In 2021-22, the growth of the industry was 6.70 per cent, the report added estimating that there will be a contraction in the production of industries as there has been no significant improvement in the economy globally due to various adverse factors created in the economy in recent times.

Government, development partners launch Public Expenditure and Financial Accountability Assessments

Nepal has a robust legislative and institutional framework for public financial management, but further reforms are needed to strengthen fiscal and budget outcomes to support green, resilient, and inclusive development, says the third Public Expenditure and Financial Accountability (PEFA) Performance Assessment Reports.

The PEFA Performance Assessment Reports were jointly launched today by the government  with support from the Multi-Donor Trust Fund. The assessment is based on the internationally recognised PEFA Framework to assess the progress of Public Financial Management (PFM) across the government. Based on the assessments, the government will prepare a medium-term PFM Reform Strategy and Action Plan.

“Public financial management has the power to change people's lives and livelihoods,” finance minister Barsha Man Pun said, adding that Nepal is committed to establishing a strong and robust public finance system and transforming the public financial management landscape through rigorous reforms and adoption of digital governance.

The government partnered with the Nepal Public Financial Management Multi-Donor Trust Fund supported by Australia; European Union; the United Kingdom’s Foreign, Commonwealth, and Development Office; Norway; Switzerland; and U.S. Agency for International Development and administered by the World Bank to conduct the assessments. The reports consist of the PFM Performance Assessment, Climate Responsive PFM Performance Assessment, and Gender Responsive PFM Performance Assessment. Nepal is the second country after Bhutan in South Asia to undertake PEFA Climate and PEFA Gender Assessments. 

According to the PFM performance assessment, the government has deployed a range of information systems to enhance the efficiency of PFM. The adherence to international standards in the budget and accounts classification ensures comparability, accuracy, comprehensiveness, and transparency in financial information. Budgets are designed with a medium-term outlook, and the predictability of resource availability for spending units is at a high level. The fiscal transfers allocated to subnational governments exhibit transparency and adherence to established rules while the scope and coverage of both the internal and external audits are extensive. 

“Nepal’s successful completion of the PEFA assessment demonstrates its commitment to sound financial management practices,”  World Bank country director for Maldives, Nepal, and Sri Lanka Faris Hadad-Zervos said, adding that development partners, including the World Bank, are committed to supporting the next generation of public financial management reforms for Nepal’s green, resilient, and inclusive development. 

The assessment highlights the following areas for potential PFM reforms to achieve better fiscal and budgetary outcomes in the future:

• Restoring fiscal credibility through a sustainable medium-term expenditure framework, recalibration of fiscal rules, expenditure reprioritization, and risk management. 

• Improving public investment efficiency by reducing inefficiencies and building climate-resilient infrastructure. 

• Applying a climate and gender lens to fiscal decision-making to mainstream climate and gender considerations. 

• Enhancing fiscal transparency and accountability by enforcing fiscal rules and promoting accountability.

“As the PEFA assessment demonstrates, some crucial elements center on fiscal discipline and its impact on service delivery. Better fiscal discipline is needed for more effective, inclusive, and accountable delivery of services,” said acting mission director of USAID Nepal Karen Welch. “We, the development partners, bring assistance that supports the government’s efforts across many sectors, like health and education, environmental preservation, and attention to marginalised groups. Sound PFM allows us to work together to better benefit the people of Nepal.”

The programme was chaired by the finance secretary Madhu Kumar Marasini. chief secretary. Dr Baikuntha Aryal, revenue secretary Dr Ram Prasad Ghimire, and financial comptroller general Hari Prasad Mainali expressed their views and reiterated their commitment for PFM reforms as indicated by this assessment. The event also included a panel discussion on the topic: “How can Nepal improve capital expenditure to achieve development outcomes?”.

The event was attended by high-level government officials, accountability institutions, and development partners involved in PFM, including climate and gender agencies. 

Basant Chaudhary's BLC Holdings and Hiranandani Group's Yotta to build a Tier 3 data center in Nepal

Basant K Chaudhary led BLC Holdings and India's Yotta Data Services Pvt Ltd today signed an agreement to build the first-ever super cloud data center in Ramkot.

BLC managing director (MD) Megha Chaudhary and chief executive officer (CEO) of Yotta Sunil Gupta signed the agreement on behalf of their respective companies during the opening session of the Nepal Investment Summit 2024.

Under the agreement, the two will jointly build a data center in Ramkot at the estimated cost of around Rs 3 billion.

This is a crucial forward leap for Nepal in the data center space, according to the information of the BLC Holdings. "It also presents a solid opportunity for the Indian company to tap into the Nepali market."

BLC Holdings is owned by Basant K Chaudhary whereas Yotta Digital Services is a subsidiary of Indian conglomerate Hiranandani Group.

Hiranandani Group -- owned by billionaire brothers Surendra Hiranandani and Niranajan Hiranandani -- is one of the reputed real estate company in India, who has investments in health and service sectors also. 

Both the companies called the collaboration an important milestone.

According to Yotta, it will leverage local resources, regulatory capacity and local relationships, as well as BLC’s customer network, apart from strengthening Nepal’s access to its major platform, which will enable Nepal to access global expertise, international standards, and advanced technologies.

The data center will spread over 11 ropani of land in Ramkot, according to the BLC Holdings. "It produces an IT load of up to 4 megawatts. It will be a modern and advanced infrastructure, equipped with modern safety protocols."

In addition, it will also offer services to both enterprise and hyperscale customers, the company added.

Nepal’s first-ever 'super cloud' tier 3 data center is named 'K One'.

BLC MD Chaudhary, after signing the agreement, said that the K one data center in Ramkot will develop an IT ecosystem in Nepal. "It will be designed by Global Hyper Scalers," she said, adding that it will significantly boost Nepal’s profile in the data center industry and help create employment opportunities in the construction and IT industries.

The agreement includes cooperation for the establishment of world-class data centers, cloud services and artificial intelligence platform services in Nepal, Chaudhary added.

Yotta has two operational data centers, Yotta NM1 in Navi Mumbai and Yotta D1 in Greater Noida, Delhi.

Development Finance Institutions commit increment in investments in Nepal

The Second Development Finance Institutions (DFI) Mission, that started on Tuesday in Nepal, concluded today with a commitment to explore investment opportunities in Class B Banks, Micro-Finance Institutions (MFIs), and Digital Financial Service Providers, following productive deal facilitation sessions held during the three-day mission.

During a meeting with finance minister Barsha Man Pun yesterday, DFI representatives received assurance of the government’s commitment to facilitating foreign investments. In this regard, the finance minister highlighted several amendments made earlier this week to laws aimed at simplifying foreign investments.

“The agendas linked to challenges to ease investments by Development Finance Institutions are gradually being addressed by the government, which is a positive sign to mobilise local saving and attract foreign investments," chairman of the Board of the Swiss Investment Fund for Emerging Markets (SIFEM) Jörg Frieden said, adding that the recognition of DFIs as development and economic growth partners by the government is very encouraging for our investments.

The DFI Mission, organised by Invest for Impact Nepal (IIN), was attended by 14 Development Finance Institutions and Impact Investors from the United States, Europe, and the United Kingdom and Multilateral Agencies such as the IFC.

The mission’s primary focus was on accelerating DFI investments in Nepal's financial service industry beyond Class A Banks. During the mission, DFIs delegates also had meetings with the finance secretary Madhu Kumar Marasini and Nepal Rastra Bank’s governor Maha Prasad Adhikari and the deputy governor Bam Bahadur Mishra, to discuss on the execution of the Memorandum of Understanding (MoU) between the Nepal Government and Development Finance Institutions signed in October 2023 and the issues related to easing entry and exits for DFI investments, respectively.

Representatives of the Nepal Bankers’ Association (NBA) and DFIs also explored opportunities to scale up Nepal’s Financial Service Industry and the role of DFIs to promote sustainable financing.

The First Development Finance Institutions (DFI) Mission in Nepal was held in April 2023.

The Government of Nepal, Finance Ministry and Development Finance Institutions (DFIs) signed a Memorandum of Understanding on October 31, 2023.

The MoU outlines an agreement to enhance the inflow of private capital investment from DFIs into Nepal, the need for transformative investments to achieve UN SDG goals, to foster favourable investment climate, and transfer of technical know-how and knowledge to enhance Nepal’s competitiveness.

Nepal Rastra Bank in its amendment to the Foreign Investment and Foreign Loan Management Bylaws -2080 (February 2024), has recognised DFIs as a category of investors (government/inter-government owned institutions).

The DFI Investments in Nepal from 2008-2023 has amounted to $1.1 billion with the financial sector comprising for 59 per cent of the total.

Remarkably, between 2021 and 2023, the financial sector attracted $629.9 million investments from DFIs.

Attendees of the second DFI Mission included Asian Development Bank (ADB), British International Investment plc (BII), Société Belge d’Investissement pour les Pays en Developpement (BIO), Nederlandse Financierings Maatschappij voor Ontwikkelingslanden nv (FMO), Swiss Investment Fund for Emerging Markets (SIFEM), Deutsche Investitions- und Entwicklungsgesellschaft (DEG), Finnish Fund for Industrial Cooperation (FINNFUND), International Finance Corporation (IFC), US International Development Finance Corporation (DFC), Japan International Cooperation Agency (JICA), MicroVest, DAI Capital, responsibility and Symbiotics, according to a press note issued by the IIN.

Global commodity prices level off, hurting prospects for lower inflation

Global commodity prices are leveling off after a steep descent that played a decisive role in whittling down overall inflation last year, which could make it harder for central banks to cut interest rates quickly, according to the World Bank’s latest Commodity Markets Outlook.

The report also finds that a major outbreak of conflict in the Middle East could halt the inflationary decline that has occurred over the past two years.

Between mid-2022 and mid-2023, global commodity prices plummeted by nearly by 40 per cent. This helped to drive most of the roughly 2-percentage-point reduction in global inflation between 2022 and 2023. Since mid-2023, however, the World Bank’s index of commodity prices has remained essentially unchanged. Assuming no further flare-up in geopolitical tensions, the Bank’s forecasts call for a decline of 3 per cent in global commodity prices in 2024 and 4 per cent in 2025. That pace will do little to subdue inflation that remains above central bank targets in most countries. It will keep commodity prices about 38 per cent higher than they were on average in the five years before the Covid-19 pandemic.

"Global inflation remains undefeated," the World Bank Group’s chief economist and senior vice president Indermit Gill, said, adding, "A key force for disinflation—falling commodity prices—has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next. The world is at a vulnerable moment: a major energy shock could undermine much of the progress in reducing inflation over the past two years.”

Persistently high geopolitical tensions over the past two years have propped up the price of oil and many other critical commodities even as global growth has slowed. The price of Brent crude oil, for example, surged to $91 per barrel earlier this month—nearly $34 per barrel above the 2015-2019 average. The Bank’s forecasts indicate that Brent prices will average $84 per barrel in 2024 before declining to an average of $79 in 2025, assuming no conflict-related supply disruptions. If the conflict in the Middle East were to escalate further, however, oil-supply disruptions could push up global inflation. A moderate conflict-related supply disruption could raise the average Brent price this year to $92 per barrel. A more severe disruption could see oil prices surpass $100 per barrel, raising global inflation in 2024 by nearly one percentage point.

“A striking divergence is emerging between global growth and commodity prices: despite relatively weaker global growth, commodity prices will most likely remain higher in 2024-25 than in the half-decade before the Covid-19 pandemic,” said Ayhan Kose, the World Bank Group’s Deputy Chief Economist and Director of the Prospects Group. “One critical factor behind this divergence relates to heightened geopolitical tensions that are keeping upward pressure on prices of major commodities and stoking risks of sharp price movements. Central banks must remain alert about the inflationary implications of commodity-price spikes amid elevated geopolitical tensions.”

The average price of gold—a popular choice for investors seeking 'safe haven'—is expected to hit a record in 2024 before moderating slightly in 2025. Gold holds a special status among assets, often rising in price during periods of geopolitical and policy uncertainty, including conflicts. Strong demand from several developing-country central banks, along with heightened geopolitical challenges, is expected to bolster gold prices throughout 2024.

An escalation of the conflict in the Middle East could also drive up prices of natural gas, fertilizers, and food, the report notes. The region is a crucial gas supplier—20 per cent of global liquefied natural gas (LNG) trade transits the Strait of Hormuz. If the LNG supply were interrupted, fertilizer prices would also rise substantially, likely driving up food prices. The Bank’s baseline forecast, however, is for overall food prices to decline somewhat—by 6 per cent in 2024 and 4 per cent in 2025. Fertilizer prices are expected to fall by 22 per cent in 2024 and 6 per cent in 2025.

Accelerating investment in green technologies has bolstered prices of key metals that are critical for the global clean-energy transition. Prices of copper—necessary for electricity-grid infrastructure and electric vehicles—surged to a two-year high this month. They are expected to rise by 5 per cent in 2024 before stabilizing in 2025. Prices of aluminum are forecast to rise by 2 per cent in 2024 and 4 per cent in 2025, bolstered in particular by the production of electric vehicles, solar panels, and other renewable-power infrastructure.

The report also contains a special focus section evaluating the performance of five well-known approaches used to forecast the prices of three key commodities—crude oil, copper, and aluminum. It finds that each of them suffers from certain deficiencies, but each also offers important advantages. As a result, the analysis suggests, forecasts are most accurate when they reflect a variety of analytical approaches—and a healthy dose of judgment.

Qatar Emir Al Thani wraps up Nepal visit, Nepal-Qatar sign two agreements, six MoUs

Qatar Emir Sheikh Tamim bin Hamad Al Thani concluded his two-day state visit to Nepal and left Kathmandu today afternoon.

President Ram Chandra Poudel and other high-ranking officials saw off Al Thani at the Tribhuvan International Airport (TIA) this afternoon in Kathmandu.

Earlier Nepal and Qatar signed two agreements and six memorandums of understanding (MoUs) following a delegation-level bilateral meeting at The Soaltee Hotel in Kathmandu. Prime Minister Pushpa Kamal Dahal and Qatar Amir Al Thani led their respective delegations in the meeting.

According to a press note issued by the Foreign Ministry, the two countries have signed different agreements and MoUs for cooperation in the fields of education, arts and culture, sports, news agencies, diplomatic training and attorney general offices.

Likewise, the private sector organisations of the two countries also signed agreement to further enhance economic relations between the two countries.

Emir Al Thani arrived in Kathmandu yesterday afternoon from Dhaka after wrapping up his state visit to Bangladesh. He held talks with President Ram Chandra Poudel at the Office of the President yesterday evening. 

Later, he attended a state reception organised by President Poudel in the honour of the Qatar Emir and the Qatari delegation.

After the bilateral meeting with Prime Minister Pushpa Kamal Dahal today, Qatar Emir Al Thani attended a luncheon hosted by Prime Minister Dahal.

Nepal has also decided to gift a pair of elephants to the State of Qatar.

Agreements and MoUs signed:

i) MoU for Cooperation in the Fields of Culture and Arts

ii) MoU for Cooperation in the Field of Education, Higher Education and Scientific Research

iii) MoU on Cooperation in the Field of Youth and Sports

iv) MoU on Cooperation between the Office of the Attorney General of Nepal and the Public Prosecution of the State of Qatar

v) MoU on Cooperation in the Field of Diplomatic Training and Education between the Institute of Foreign Affairs (IFA), Nepal and the Diplomatic Institute of Qatar

vi) Renewal of the MoU between Qatar Chamber and the Federation of Nepalese Chambers of Commerce & Industry (FNCCI)

vii) Agreement on Cooperation and Exchange of News between Rastriya Samachar Samiti of Nepal and Qatar News Agency (QNA)

vii) Agreement on the establishment of Joint Business Council (JBC) between Qatar Chamber and the Federation of Nepalese Chambers of Commerce & Industry (FNCCI)

Before signing agreements, Prime Minister Dahal held bilateral talks with Emir of Qatar Sheikh Tamim bin Hamad Al-Thani.

Taking stock of the existing relations so cordially subsisting between Nepal and Qatar, both leaders discussed about enhancing bilateral cooperation by furthering the avenues of partnerships.

Following the talks, the Prime Minister and Emir witnessed a signing ceremony of bilateral agreements and MoUs. 

Meanwhile, Prime Minister Pushpa Kamal Dahal 'Prachanda' has said that there should be an exchange of bilateral assistance between Nepal and Qatar in the best interests of both nations by further consolidating the bilateral ties.

During the bilateral talks, Prime Minister apprised the distinguished guest that Nepal offers ample and appropriate opportunities for investment in agriculture, tourism, and infrastructure sectors.

Stating that Nepali migrant workers in Qatar have served as a tool to further strengthen the friendly relations between Nepal and Qatar, he spoke of the need to deepen such ties in the days to come.

The Prime Minister also called on Qatar to facilitate the safe release of Nepali student Bipin Joshi, who has been missing since the conflict between Israel and Hamas.

Affirming that Nepal and Qatar always enjoy a cordial relationship, the Prime Minister said this relationship is founded on cordial friendship, mutual respect, trust, and assistance. "Qatar remains as a reliable friend of Nepal and such relations are getting deeper and extended," he said, adding that these relations are not limited to just an official level but have been expanded to the people-to-people level as well.

Describing Nepal as 'one of the attractive destinations for investment for the globe', Prime Minister Dahal said agriculture, energy, hydropower, infrastructure development, tourism, information and communications technology, service and hospitality sectors are suitable areas for foreign investment in Nepal.

"Nepal is a suitable place for producing organic agricultural products due to its geographical diversity," he said, adding that the Qatari investors would be encouraged to consider investment in this sector since Nepal was a center of attraction in tourism in the world parlance.

Remembering the ascent of the highest mountain in the world Mt Everest by the first Qatari man, Sheikh Mohammed bin Abdulla Al-Thani in 2013, the Prime Minister said that it helped contribute in the promotion of Nepal's tourism in the world.

On the occasion, PM Dahal requested to include Nepal in the list of Qatar's Tourism Authority's external tourism destination.

PM Dahal urged the Qatari government for operation of flights from Lumbini and Pokhara to Qatar as well.

Stating that there were effective and sufficient air transportation between Kathmandu to Doha, PM Dahal urged the Qatari government to consider operating flights from Lumbini and Pokhara to Doha as well.

Earlier, stakeholders had urged the government to take initiatives for operating direct flight between Bhairahawa and Qatar from Gautam Buddha International Airport during the Qatari Emir's visit to Nepal.

Siddhartha Chamber of Commerce and Industry's president Thakur Kumar Shrestha, requested the government to prioritise the proposal of operating direct flight between Bhairahawa and Qatar.

Likewise, PM Dahal observed that around 400,000 Nepalis migrant workers working in Qatar at present were an important bridge further cementing the bilateral ties between Nepal and Qatar.

"Nepal is going to establish vocational training and skill development center for aspiring Nepali migrant workers to Qatar," he said, urging Qatari government for its assistance in setting up such centre.

Nepal-Qatar Joint Business Council formed

A Joint Business Council between Nepal and Qatar has been established, which includes the private sectors of both the nations.

An agreement was reached between the two chambers today (on Wednesday) for the establishment of a council headed by president of Federation of Nepalese Chambers of Commerce and Industry Chandra Prasad Dhakal and president of Qatar Chamber Sheikh Khalifa bin Jassim Al Thani, in Kathmandu.

The agreement was signed by FNCCI president Chandra Prasad Dhakal and Qatar Chamber president Sheikh Khalifa bin Jassim Al Thani in the presence of Emir Sheikh Tamim bin Hamad Al Thani of Qatar and Prime Minister Pushpa Kamal Dahal.

The council will work in the areas of business expansion, investment promotion, technology transfer and tourism promotion, according to a press note issued by the FNCCI.

The Joint Business Council will be a permanent mechanism for dialogue with Qatar, a Gulf country experiencing rapid economic growth, the press note reads adding that the purpose of the Joint Business Council is to increase cooperation and understanding between the private sectors of Nepal and Qatar.

The council will play an effective role in attracting investments from Qatar and also expanding trade with the Gulf nation, which is known as a work destination for Nepalis. There is a high demand for agricultural products, water, herbs, spices and spice products in the Gulf countries. As Qatar is an investment destination due to its rapid economic expansion, the Joint Business Council will play an effective role in attracting investments in Nepal. The council will also work in the field of tourism promotion, it adds.

After the establishment of the council, cooperation between the two chambers is expected to further intensify and presidents of both the chambers are of the opinion that it will help in investment and business expansion.

"This agreement will further increase cooperation in the coming days," president of the Qatar Chamber Sheikh Khalifa bin Jassim Al Thani said, after signing the agreement.

Likewise, FNCCI president Chandra Prasad Dhakal said that there will be more initiatives taken through the council to increase cooperation between Nepal and Qatar. "The council will continue to work to benefit Nepal from Qatar's rapid economic development," he said adding that the establishment of the Joint Business Council will help in attracting more investments in hydropower, tourism infrastructure, agro-processing and information and communication technology sectors.

In addition, the agreement between FNCCI and Qatar Chamber has also been renewed. The new agreement was signed by FNCCI president Dhakal and Qatar Chamber president Al Thani.

The agreement was also signed in the presence of Sheikh Tamim bin Hamad Al Thani, Emir of Qatar and prime minister of Nepal Pushpa Kamal Dahal.

The first agreement between FNCCI and Qatar Chamber was signed in 2005. Since then, the two chambers have been cooperating in various ways for investment and business promotion.