Nepal’s economy is currently characterised by two aspects. On the positive side, there are external sectors like remittance, foreign exchange reserve and tourism income. The internal part, which includes the country’s production and job markets, is in a relaxed state. The demand in the market or consumption has not increased, leading to the closure of shops in commercial centres, while others have partially opened. The difficulty of affording daily costs and opening big shopping centres on the periphery have also negatively impacted the market.

Due to low production and demand, unemployment numbers have increased, as the government data proves. Frustration is growing in the business and professional sectors, and hoards of young people are leaving the country for better opportunities.

What went wrong?

The downward journey of Nepal’s economy began during the 90s. In 1992-93, the government’s initiative built the 69 MW Marsyangdi hydropower project and handed it over to the Nepal Electricity Authority. Since then, the government has not invested in big power projects for two decades until 2013, except for constructing a 144 MW power project in Kaligandaki. During that period, most foreign aid came as “software”—training, capacity development, etc.,—not for constructing “hardware” or physical infrastructure. As a result, Nepal couldn’t develop the critical infrastructure needed to strengthen the economy.

During 1994-95, the number of people leaving the country for foreign employment was only 2,159 per year, which rose to 214,094 in 2006-07. The primary factors of such a large-scale out-migration from Nepal were the higher labour force growth and limited employment opportunities outside the farm sector.

Moreover, the civil war (1996-2006) brought people under the repression of both the state and the Maoists. The government presence in the villages was nearly zero, pushing young men into cities to save their lives. It was evident for them to find greener pastures, and the movement of seeking foreign employment started increasing from the cities. Parents were not hesitant to send their children abroad as it was the only alternative since the war began to rage and poverty gradually rose. A poverty alleviation fund was established with 97 percent support from the World Bank. Although the fund’s main purpose was to reduce poverty, its indirect goal was to establish the government’s presence in the villages.

At present, the number of Nepalis going abroad, including students, has reached nearly 1 million, excluding those going to India. In fact, after the 2006 Comprehensive Peace Agreement between the government and the Maoists, Nepal should have focused on rebuilding and reducing foreign dependence. Significant reforms should have been made in the favourable policies. But that didn’t happen. The movement's leaders often came to power, but there was neither economic change nor a vision. After the safe landing of the Maoist conflict, the commitment to private investment increased in some areas, but its realisation remained weak.

The 2015 earthquakes, costing about Rs700 billion, hit the country at a new low. To compensate for the loss, we took a foreign loan, and in the private sector, the families rebuilt the destroyed houses using borrowed money. The three-year growth of the economy exceeded 7 percent during that time. Foreign funds flowed into Nepal, and the reconstruction work was carried out. Economic activities occurred, but we could not invest in the productive sector even then.

In recent years, some roads have been built in the villages as the state thought this would encourage people to live there and produce goods. Still, people came to the cities and moved abroad as the situation didn’t improve their income and lifestyle. Nepalis abroad sent goods to the country, but village production did not reach the cities. The villages became places for the elderly and disabled, and production remained stagnant.

During the Covid-19 pandemic in 2020, lockdowns disrupted life and the economy. Although we knew that the impact on the world would affect our economy, we did not deliver as much attention as we should have towards the mitigation. According to the Nepal Rastra Bank data, only 4 percent of the industries were fully operational, and 39 percent were partially operational then. People did not invest the money outside; it was deposited in the bank, and high liquidity was observed. The stock market attracted everyone as the capital market increased, but it did not always remain green. The Russia-Ukraine war began when industries were running at 45-50 percent capacity due to the effects of Covid-19.

Way forward

The country’s current economic situation didn’t emerge overnight. Given that, the improvement will also take some time. There should be a practical assessment of our current situation to distinguish immediate, short-term, medium-term and long-term tasks. In the name of foreign employment, getting a diversified visa and taking non-objection letters to study abroad, the trend of youth going abroad is increasing.

The leaders making stringent rules now to prevent workers from going abroad is again a wrong move. Even if youths go on a student visa, 60 percent will work there instead of studying. We are pushing the energetic manpower abroad as we have not developed adequate physical infrastructures for their development at home.

Young people should be asked why they want to go overseas. Matters related to education, employment, health facilities, opportunities and other aspects of the lives and careers of the youth should be studied as this is the most practical way to identify the causes and effects. Based on that, a sustainable environment should be created by launching programmes in various fields, especially agriculture, industry, tourism and hydropower, to encourage youths to stay in the country. Politics purification should be the first step; policy and administration malpractices must be eliminated to make a strong government that caters to the youth. Nepal’s overall development cannot be fully imagined until the youth migration stops.