World Bank Recommends Policy Actions in Four Key Areas to Unlock Nepal’s Economic Potential

Kathmandu – The World Bank (WB) has recommended that Nepal implement policy actions in four critical areas – improving migration benefits, enhancing export performance, harnessing hydropower potential, and strengthening the digital sector – to unlock its economic growth potential.

The WB report titled ‘Nepal Country Economic Memorandum: Unlocking Nepal’s Growth Potential’ released on Monday highlights that while Nepal has made remarkable progress in poverty reduction, its economic growth remains sluggish compared to regional peers. Nepal’s economy grew at an average annual real rate of just 4.2 percent between 1996 and 2023, ranking sixth out of eight South Asian nations.

According to the report, remittances have played a significant role in reducing poverty and nearly eradicating extreme poverty. However, structural challenges such as low productivity, declining exports, and a stagnant industrial sector have slowed overall economic growth and job creation in non-agriculture sectors. The report also notes that young workers continue to migrate abroad in search of better employment opportunities due to limited domestic job prospects.

The WB has pointed out that Unlocking new opportunities is seen as a key step toward achieving Nepal’s development goals. High-potential sectors such as hydropower, tourism, and digital services have the capacity to drive substantial economic and employment growth. Facilitating firm creation, increasing exports, and attracting both domestic and foreign investment are essential to opening new pathways for growth. However, achieving this will require addressing regulatory barriers, improving infrastructure, and fostering a more competitive business environment.

The WB has expressed its concern that Nepal must strengthen workforce skills, enhance institutional capacity, and improve firms’ competitiveness to translate potential into sustained growth. Without these measures, the country’s long-term growth rate could fall below 4 percent, posing a threat to national development ambitions. Additionally, improving the management of migration patterns and remittance flows will be critical to building economic resilience and accelerating growth.

Photo: The World Bank Group