Private sector frustrated by stagnant economy, Chamber president says

Nepal’s private sector is frustrated by the stagnant economy, despite initial hopes from the new government formed after the Gen-Z movement, Nepal Chamber of Commerce President Kamlesh Kumar Agrawal said. Speaking at the 25th annual general meeting of the Rupandehi Trade Association in Butwal, Rupandehi, on Saturday, Agrawal stated that the lack of economic activity is weakening the morale of industrialists and entrepreneurs, forcing the private sector to confront numerous challenges.Agrawal noted that while the private sector had high expectations from the current government, which was formed following the Gen-Z movement, the economy has not become as dynamic as anticipated. He explained that although the government’s policies and budget initially generated excitement, six months into its formation, a business-friendly environment has not materialized, hindering economic growth. Many businesses are now in a “wait and watch” situation.Challenges for BusinessesAgrawal highlighted that despite a recent drop in bank interest rates, frequent changes in government policies and tax systems have deterred the private sector from confidently investing in new projects. He claimed that approximately Rs 15 kharba (Rs 1.5 trillion) remains idle in banks, as businesses are reluctant to invest in new ventures even with single-digit interest rates. Agrawal attributed the economic difficulties to the government’s policy decisions, stating that past control-oriented policies have not yet been reformed. He emphasized the need for collaboration between the government and the private sector, urging the amendment of many business-related laws to boost entrepreneurial morale. He added that only by swiftly overcoming economic sluggishness and recession can the overall economy, including startups and industrial sectors, improve.The Chamber president also stressed the importance of making cross-border trade transparent and competitive, advocating for reduced tax rates to discourage informal trade. He called for market-oriented strategies, including aggressive branding, modern marketing, digital marketing, and online trade for domestically produced goods. Agrawal also pointed out that businesses in the Lumbini Province region cannot thrive until Gautam Buddha International Airport in Bhairahawa operates regular international flights. He noted the potential to export billions of rupees worth of products from Lumbini Province, urging the government to create a conducive environment for this. He also called for the development of an integrated economic and trade corridor between Butwal and Bhairahawa.Prakash Dhakal, President of the Rupandehi Trade Association, echoed these concerns, stating that businesses have faced increased challenges since the COVID-19 pandemic and the Gen-Z movement. He cited market sluggishness, investment insecurity, high rents, double taxation, unstable bank interest rates, an open border, and parking issues in major market areas as obstacles affecting business activities. Dhakal asserted that a high morale within the private sector is crucial for job creation, revenue generation, and sustainable national development. He also highlighted that illegal trade across the open border has adversely affected local businesses, urging the implementation of business-friendly policies. Dhakal emphasized that without an investment-friendly environment, the economy risks becoming more complex, stressing the need for policy stability and immediate resolution of operational issues. He also called on the government to prioritize infrastructure and supply chain systems, noting that blocked roads to neighboring China have halted billions of rupees worth of goods ahead of festival seasons.Savitri Devi Aryal, Deputy Mayor of Butwal Sub-Metropolitan City, affirmed the local government’s commitment to supporting businesses and addressing their concerns. She pledged that the Butwal Sub-Metropolitan City and the Rupandehi Trade Association would work together for business welfare.Economic Context and OutlookNepal’s economy is projected to grow by 2.7% in fiscal year 2026, a decrease from 4.6% in fiscal year 2025, according to an April 2026 report by the Asian Development Bank (ADB). The International Monetary Fund (IMF) estimates Nepal’s GDP growth rate at 3.0% for 2026. Inflation is projected to reach 3.7% in fiscal year 2026 and 4.5% in fiscal year 2027, although consumer price index-based inflation had fallen to 1.7% in the first half of fiscal year 2025/26. Nepal’s current account surplus reached 6.7% of GDP in the first half of fiscal year 2025/26, driven by increased remittance inflows. Total foreign exchange reserves stood at USD 22.5 billion by mid-January 2026.Nepal Rastra Bank, the central bank, issued a 1-month deposit collection instrument for Rs 20 billion on September 30, 2026, and a 28-day instrument to withdraw Rs 18 billion from the banking system on October 2, 2026. As of September 25, 2026, the base interest rates of some commercial banks, such as Nepal Bank (4.41%) and Nepal Investment Mega Bank (4.55%), were in single digits.The Gen-Z movement, which began on September 23, 2025, protested social media restrictions and corruption, leading to widespread unrest, the resignation of the Prime Minister, the dissolution of the House of Representatives, and an economic loss of approximately 1.3% of GDP. An interim government was formed, followed by new elections for the House of Representatives on March 5, 2026, which led to the formation of a single-party majority government. Prime Minister Balen Shah met with private sector representatives on July 8, 2026, pledging to place the private sector in the “driving seat” for economic improvement. Finance Minister Dr. Swarnim Wagle claimed on October 2, 2026, that the current government is the most private sector-friendly and reform-oriented in history.Despite being operational for nearly four and a half years, Gautam Buddha International Airport in Bhairahawa still lacks regular international flights. The private sector invested heavily in hotels, tourism infrastructure, and transportation in and around Bhairahawa, expecting returns from the airport’s operation, but these have not materialized due to the lack of regular flights. Efforts are ongoing from both the government and the private sector to ensure regular international flights at the airport.The Nepal Rastra Bank released its monetary policy for fiscal year 2083/84 on July 7, 2026, which will undergo quarterly and semi-annual reviews. The Nepal Chamber of Commerce handed over the preliminary draft of the ‘Trade Credit Recovery Bill, 2083’ to Minister for Industry, Commerce and Supplies Deepak Kumar Shah on September 22, 2026. The Nepal Infrastructure Conference is scheduled for 2026 to discuss legal reforms for investment and development.The specific government policies and tax system changes frequently mentioned by the private sector as hindering investment have not been detailed. Additionally, an official updated figure for the Rs 15 kharba (Rs 1.5 trillion) in idle bank deposits, as claimed by Agrawal, was not immediately available.