The FNCCI report highlights that weak domestic demand, policy and administrative hurdles, and low private sector credit growth have slowed economic momentum. Nepal's economic growth for the fiscal year 2082/83 was restricted to 3.85 percent, falling short of the government’s 7 percent target and trailing behind broader South Asian growth projections. Industrial capacity utilization currently stands at an average of 44.5 percent, with business confidence dropping to its lowest level in 36 years.
Although bank deposits grew by 13.9 percent, private sector credit expansion crept up by only 6.6 percent—far below the Nepal Rastra Bank’s 12 percent target, and dropping to 3.4 percent when adjusted for inflation. Even with average loan interest rates declining to 6.55 percent, credit has skewed heavily toward consumption rather than productive sectors like industrial production and agriculture. Furthermore, 63 percent of total loans remain collateral-based, leaving small and medium enterprises (SMEs) struggling to secure financing.
Compounding these economic challenges, recent natural disasters have added significant pressure. Floods in the Bhotekoshi river in Rasuwa caused estimated losses of Rs 408 billion, damaging approximately 4,800 businesses and 13 hydropower projects, while disrupting key trade routes with China. The FNCCI estimates that Rs 723 billion will be needed for reconstruction and has urged streamlined loan restructuring, concessional financing, and expedited insurance claims for affected businesses.
To revitalize the economy, the FNCCI has outlined a multi-point reform agenda. The federation emphasizes the need to ease financing for SMEs by shifting toward transaction- and cash-flow-based lending rather than rigid collateral requirements. It also calls for removing regulatory bottlenecks across foreign investment, land, environmental approvals, and tax administration, alongside establishing a permanent Trade Facilitation Council to streamline cross-border trade.
Additionally, the FNCCI recommends channeling surplus hydroelectric power into domestic industries, electric transport, and cold storage, while redirecting remittances toward capital markets and enterprises started by returning migrant youth. Finally, the federation stressed the importance of fostering a stable policy environment and ensuring trust-based collaboration between the government and the private sector to successfully mobilize available capital into productive investments.
