Nepal is experiencing a swift demographic transition characterised by an increasing elderly population. The Senior Citizens Act of 2063 in Nepal defines senior citizens as individuals who have reached the age of 60 years or older. There are 2.97 million senior citizens in Nepal—a 38.2 percent increase compared to 2011.

According to UNICEF’s (2017) report, an “ageing society” is one in which the percentage of individuals aged 65 years and above (known as old-age dependents) accounts for 7 percent or more of the total population. When this number doubles to 14 percent or more, it is classified as an “aged society.” Nepal will become an ageing society around 2028, approximately four years from 2024. Additionally, it is predicted that Nepal will become an aged society around 2054.

Demographic dividend

A demographic dividend can be understood as a period when the share of the working-age population is larger than that of the non-working-age population. The 2021 census has identified 62 percent of Nepal’s working-age population, i.e., aged 15-59 years. However, as per international practice, the 15-64 age group is considered working age, which is 65 percent of the total population in Nepal. A large share of the working-age population is regarded as a demographic window of opportunity, during which nations can accelerate economic and social development by taking advantage of the rising share of the population in the working ages. This demographic dividend is characterised by a shift from high to low levels of mortality and fertility.

A 2023 study, "Ageing Trend and Situation in Nepal”, shows that from 1952 to 2021, the crude birth rate declined from 45 percent to 20 percent, the total fertility rate fell to 1.8 percent, and the crude death rate decreased from 36.7 percent to 6.3 percent. The infant mortality rate also declined from as high as 250 to approximately 23 per thousand live births in a year. However, if we look at the growth rate of the older population in Nepal, the percentage of the older population is 10.21 percent—the highest in the history of Nepal. New entrants in the labour market have been peaking. Simultaneously, the total absentee population (defined as those absent from households and gone abroad for more than six months before the census date) has also increased to 2.2 million in 2021—over 3 times the total number in 1991.

The shift from a period of the demographic dividend to an ageing population affects the quality of life (QOL) for the elderly. The significant factors associated with a decrease in the QOL of elderly people are mainly: Reduced physical and mental functions, loneliness, impaired sexual activity, and chronic metabolic disorders, which further lead to emotional disturbances. A study titled “Senior Citizens in Nepal: Policy Gaps and Recommendations” revealed that older populations in Nepal have been facing various challenges, including social isolation, limited healthcare accessibility and financial difficulties. It also suggested that family support, especially from children, is more significant in promoting happiness and satisfaction among the older population.

Is social protection strong enough?

Nepal has taken steps to ensure the rights of senior citizens. The Senior Citizens Act was enacted in 2006 to provide protection and social security to senior citizens. The 2015 Constitution of Nepal states in Article 41 that “Senior citizens shall have the right to special protection and social security from the State”. According to an ILO (2023) report, 80.2 percent of the population that is 60 years of age and above have access to social protection through a mix of contributory and non-contributory schemes.

Additionally, benefits have reached almost 100 percent of individuals above 70, with women’s coverage being higher than men’s. This reflects how old age allowances have been effective in reaching those in need. However, the ILO report has further highlighted the need to establish smooth coordination between Social Security Fund (SSF) and Social Security Allowance (SSA) funds to ensure benefit adequacy and long-term fiscal sustainability of non-contributory schemes. Furthermore, the report suggests that Nepal should explore a more predictable and equitable pension system because the existing defined contribution pensions and lump sum payments do not offer predictable income security to workers. The ILO multi-pillar pension model is advisable as it effectively combines elements of non-contributory pensions and predictable and adequate contributory pensions, which can be further complemented by provident funds and saving schemes.

What this means for our economy?

With an increasing ageing population, the demographic dividend may not last longer in Nepal if we don’t focus on enabling policies and, at the same time, increasing funding to support the growing older population. The government can engage the working-age population in the productive sector, thereby increasing tax revenues that support these schemes.

However, analysing our absentee population, nearly all migrant workers from Nepal are young adults and from the most productive economic age group of 18 to 44, with half between the ages of 25 and 34 years. Another important yet less prioritised sector is utilising the diaspora communities of our out-migrants in different parts of the world. For this, coordinating with the governments of destination countries of our out-migrants to systematically record a centralised database can go a long way.

Nepal has already initiated building a robust and centralised database, the Foreign Employment Information Management System (FEIMS), which is exemplary. However, more effort is critical in leveraging the database for trend analysis and other policy priority tasks. The integration of FEIMS with the information management system of the destination country could be desirable for tracking and utilising the skills of our outmigrants for our country’s development. This could change the notion of brain drain to brain gain. If not taken action on time, Nepal could face repercussions due to its inability to channel the youth to prosper economically.

It is important to note that harnessing this demographic dividend is not automatic but requires careful planning, policy coordination and long-term vision. The nation can reap the maximum benefits of this golden period if it invests more in education, health, and infrastructure, where a large portion of the labour force works in the productive sector. At the same time, implementing models such as the ILO multi-pillar pension model can strengthen the social security system, offering good support for the elderly.