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🇳🇵 Nepal /Economy & Trade

Raised $4 billion. Time for a new round

From Kathmandu Post · () English

Summarized and contextualized by DistantNews.

At a glance

In-depth Sources not specified Context piece
  • Swarnim Wagle, now Finance Minister, previously played a key role in securing over $4 billion in reconstruction aid after Nepal's 2015 earthquakes.
  • Wagle recently presented Nepal's largest-ever budget, proposing market-friendly reforms like tax cuts and simplified customs, aiming for 7% growth.
  • Despite these reforms, the Nepal Stock Exchange has fallen significantly, private investment has declined, and capital budget spending remains low.

Swarnim Wagle, Nepal's current Finance Minister, has a history of successfully mobilizing international aid, notably after the devastating 2015 earthquakes. A decade ago, he was instrumental in a rapid and credible disaster assessment that put reconstruction needs at $6.7 billion. This led to a pledging conference where the international community committed over $4 billion, a feat of economic diplomacy that instilled hope when Wagle took office in March.

How much would it cost to rebuild and could the world be persuaded to pay for it?

— Question after 2015 earthquakesThe central question driving the Post Disaster Needs Assessment led by Swarnim Wagle.

His appointment was seen as a potential turning point, especially with the ruling party's strong majority offering political stability and a clear mandate for reform. This unique situation presented an opportunity to translate legitimacy into capital and drive economic progress.

Over $4 billion was pledged, with India committing $1 billion, China $483 million, the World Bank $500 million and ADB $600 million.

— Article textDetailing the international community's response at the International Conference on Nepal’s Reconstruction.

In line with this, Wagle unveiled Nepal's largest budget to date, totaling Rs2,124.34 billion, with an ambitious target of 7% economic growth. The budget included several market-friendly measures: doubling the income tax exemption threshold, reducing the top marginal tax rate to 29%, simplifying customs tariffs, abolishing excise duty on numerous goods, and proposing a sovereign wealth fund for Nepal's substantial $24 billion reserves. Additionally, plans were announced to ease foreign investment exit rules, enable Nepali firms to list on foreign exchanges, and pursue new investment-protection and double-taxation treaties.

Finally, here was a technocrat who had actually done the thing everyone talks about doing.

— Article textDescribing the hope surrounding Swarnim Wagle's appointment as Finance Minister.

However, the market's reaction has been largely negative. Since Wagle's government took office, the Nepal Stock Exchange has experienced a significant decline, erasing nearly Rs600 billion in market value. Non-performing loans have risen, and private investment as a share of GDP has fallen. Furthermore, the utilization of the capital budget remains sluggish, with only 35% spent by June, indicating challenges in translating policy into tangible economic activity.

Political stability with a clear reform mandate and no coalition to appease.

— Article textHighlighting the favorable political conditions for reform under the current government.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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