Key challenges in Nepali economy identified by Khanal commission 2081

1. Macroeconomic & Demand Issues

1. Stagnant GDP growth fails to generate employment or transformation.
2. Household consumption has declined post-pandemic.
3. Private investment is falling due to low confidence.
4. Public capital spending remains underutilized.
5. The economy shows signs of demand-side recession.
6. Inflation has been unstable, reducing real incomes.
7. Interest rate fluctuations hinder consumption planning.
8. Foreign exchange reserves pressure the macro balance.
9. Nepal faces low productivity growth across sectors.
10. Aggregate demand is insufficient to trigger recovery.
11. Widening current account deficit signals imbalance.
12. Welfare loss due to stagnant remittances.
13. GDP per capita has plateaued in real terms.
14. Weak government capital execution lowers fiscal multipliers.
15. Lack of economic diversification makes the economy fragile.
16. Urban-rural demand disparities are growing.
17. Uncertainty reduces consumption of durable goods.
18. Consumption is dependent on remittances and not wages.
19. Trade deficit persists, driven by consumer imports.
20. Cyclical slowdown and structural weaknesses reinforce each other.

2. Financial Sector & Liquidity

21. Cooperative collapses have led to a liquidity drain.
22. High credit-deposit ratio limits further lending.
23. Banks depend on real estate as collateral, increasing risk.
24. Financial intermediation costs are high due to inefficiency.
25. Credit access is concentrated among large borrowers.
26. Micro, small, and medium enterprises face credit rationing.
27. Non-performing assets are on the rise in rural banks.
28. Interest rate spread remains large, discouraging savers.
29. Informal lending persists due to exclusion from banking.
30. The central bank lacks tools for counter-cyclical response.
31. Over-regulation and under-supervision coexist in cooperatives.
32. Digital banking adoption is uneven across regions.
33. Bank mergers disrupted rural credit delivery.
34. NRB’s credibility weakened due to frequent policy shifts.
35. Government deposits are parked in commercial banks unused.
36. No deposit insurance exists for cooperatives.
37. Absence of risk-based lending frameworks.
38. Monetary transmission is weak across provinces.
39. Shadow banking activities remain unchecked.
40. Credit flows diverted to consumption, not production.

3. Governance & Public Institutions

41. Frequent reshuffling of officials disrupts continuity.
42. SOEs suffer from mismanagement and political appointments.
43. Planning commissions at provincial levels lack staff.
44. Local governments operate without technical expertise.
45. Inter-tier coordination remains poor under federalism.
46. Budget allocations influenced by political affiliations.
47. Oversight bodies lack independence and capacity.
48. Audit findings often ignored without consequences.
49. Bureaucracy lacks incentives for performance.
50. Development committees duplicate ministerial work.
51. Project monitoring systems are fragmented and weak.
52. Policy changes often reverse previous gains.
53. Parliament lacks expertise for economic scrutiny.
54. Citizen engagement in budgeting is minimal.
55. Corruption in procurement undermines public trust.

4. Legal & Regulatory Issues

56. Laws are outdated and fragmented across jurisdictions.
57. Licensing processes are redundant and time-consuming.
58. Multiple agencies demand overlapping documents.
59. Business registration costs are high for small firms.
60. Environmental clearance laws are unclear and delayed.
61. Contract enforcement takes over two years.
62. No commercial arbitration framework in place.
63. Land acquisition is legally cumbersome.
64. Red tape drives firms into the informal economy.
65. Rule changes are frequent without transition periods.
66. Legal confusion due to overlapping mandates.
67. Data privacy laws are weak and undefined.
68. Intellectual property enforcement is poor.
69. Startup law and e-commerce regulations missing.
70. Cooperative law lacks depositor protection clauses.

5. Tax & Revenue System

71. Over-reliance on indirect taxes burdens the poor.
72. VAT refunds are delayed or denied arbitrarily.
73. Municipalities collect unauthorized taxes.
74. Tax audits are subjective and poorly targeted.
75. Customs valuation is non-transparent.
76. Tax base excludes high-income professionals.
77. Real estate transactions often underreported.
78. Excise duties vary unpredictably.
79. Lack of centralized taxpayer grievance redress.
80. Double taxation exists across government tiers.

6. Infrastructure & Public Investment

81. Over 1,000 road projects remain incomplete.
82. Hydropower projects face delays of 5–10 years.
83. Bridges are built with no connecting roads.
84. Airports under construction lack traffic forecasts.
85. Maintenance budgets are rarely allocated.
86. Contractors abandon projects with impunity.
87. No national infrastructure pipeline published.
88. Procurement is prone to delays and disputes.
89. Project evaluations are rarely conducted post-completion.
90. Municipal roads are not coordinated with federal plans.
91. Rural infrastructure lacks technical design review.
92. EIA and IEE assessments are weakly implemented.
93. Strategic projects stuck in litigation.
94. Urban transport plans are not integrated.
95. Irrigation canals lack water regulation systems.

7. Agriculture & Food Systems

96. Farm labor shortages due to youth migration.
97. Irrigation schemes do not cover tail-end farms.
98. Seed quality control is poor.
99. Agri-credit limited to a few cooperatives.
100. Crop insurance uptake is minimal.
101. Agro-warehousing is scarce and underused.
102. No national buffer stock policy exists.
103. Cold chains for perishables are missing.
104. Market prices are volatile and unregulated.
105. No contract farming law exists.
106. Fallow land expanding across hill districts.
107. Soil degradation increasing in Terai.
108. Post-harvest losses exceed 30% in vegetables.
109. Mechanization limited to few accessible districts.
110. Youth uninterested in farming careers.

8. Employment, Labor & Migration

111. Youth unemployment exceeds 30% in urban areas.
112. Vocational training does not match market demand.
113. Maternity benefits poorly implemented.
114. Social security fragmented and poorly funded.
115. Returnee migrants lack support for reintegration.
116. Women face hiring bias in formal jobs.
117. Labor inspection system is outdated.
118. Gig economy unregulated, leaving workers exposed.
119. Apprenticeship programs are underfunded.
120. Pension system excludes most private workers.
121. Minimum wage enforcement is weak.
122. Nepali workers abroad face exploitation.
123. Skill certification not linked to regional standards.
124. Public jobs reserved but unfilled for marginalized groups.
125. Labor market data not timely or accessible.

9. Education & Human Capital

126. STEM education underrepresented in curricula.
127. Teacher absenteeism in rural schools is high.
128. No national HR needs assessment framework.
129. Public universities lack funding and autonomy.
130. Private tuition creates inequality in learning.
131. TVET system is fragmented and donor-driven.
132. Digital literacy is low beyond cities.
133. Soft skills are not taught at any level.
134. Education spending not linked to outcomes.
135. Language of instruction varies without policy.

10. Digital Economy & Innovation

136. Startups face 14+ compliances to register.
137. IT exports require redundant clearances.
138. Cybersecurity framework outdated.
139. No government grant scheme for R&D.
140. Low cloud infrastructure investment.
141. E-commerce laws unclear on consumer rights.
142. Digital payment interoperability issues remain.
143. Low investment in AI and advanced tech.
144. Weak digital public infrastructure (DPI) standards.
145. Lack of public open data policy.

11. External Sector & Trade

146. Exports rely on low-value raw materials.
147. Export procedures are cumbersome and costly.
148. Lack of FTAs with large markets beyond India/China.
149. Tourism policy lacks focus on high-value visitors.
150. Foreign investor repatriation remains restricted.