Geopolitical conflicts and tensions are fuelling a surge of economic fragmentation and protectionism around the world, which would hit poor nations in particular, experts warn.

In addition, there is a climate crisis, which would require huge amounts of money to cushion the shocks.

But who will fund it?

The Horizons Dialogue series, organised by the British Embassy and UK International Development in Kathmandu on Wednesday, brought together national and international experts to discuss the challenges and opportunities in Nepal’s development in the next ten years amid geopolitical conflicts and growing climate crisis.

Experts have warned that the geopolitical conflict's repercussions could cause Nepal to lose foreign grants, loans, and other support.

“We [Nepal] have seen a decline in international cooperation after the Covid-19 pandemic, the Russia-Ukraine war and conflict in the Middle-East countries,” said Kalpana Khanal, senior research fellow leading the Center for Economic and Infrastructure Development Policy at the Policy Research Institute. She was speaking on the theme ‘Navigating Nepal’s Fragility’.

Khanal said, “The world is experiencing violence, interstate wars, and economic turbulence, with some countries adopting more anti-globalisation policies and populist regimes. This could cause a decline in international cooperation.”

What will happen then?

Khanal explained that such a scenario would force Nepal to focus on revenue collection to repay loans and interest rather than funding critical projects.

“Currently, Nepal is channelling 22 percent of its total revenue towards debt servicing. In such a situation, if we do not receive the grant and rely more on loans, it will hinder overall development,” said Khanal.

Nepal's public debt is 43 percent of its total GDP, half of which is made up of external loans and support.

“We can potentially face a decline in international cooperation, as global lenders and development partners may channel funds towards the war-ridden countries like Ukraine and Palestine,” Khanal said.

Khanal said climate change, amid geopolitical tension, may hamper projects built with foreign loans.

“Many of the ongoing hydropower projects in Nepal rely on foreign loans. The devastating floods and landslides due to extreme weather conditions increase the project's costs. This, too, impacts public debt,” Khanal said.

The global war will bring not only disaster but also hunger.

Khanal said Nepal’s food inflation increased sharply after the Covid-19 pandemic and the Russia-Ukraine war. “It’s high time the country focused on food security.”

According to a report prepared by the organisers, over the next decade, changes in the demand for Nepali workers, particularly in India and the Middle East, or geopolitical events that limit labour migration could have major impacts on the national development trajectory.

Climate change, disasters, and health crises could also have significant economic impacts. In recent years, disruptions to agriculture from droughts and floods have led to sharp rises in food prices, the report said.

Nearly 60 percent of Nepal’s population relies on agriculture, and two-thirds of that group is engaged in subsistence farming. The report said that, as a result of male outmigration, women constitute 73 percent of the agricultural workforce.

Over the past decades, air quality has significantly deteriorated, consistently exceeding the World Health Organization's limits. The participants say that without significant intervention, it is likely to deteriorate further in the next five years.

“But hopefully, in 10 years, we have projected some improvement in some areas,” said Arun Bhakta Shrestha, senior climate change specialist and programme manager for the Regional River Basins and Cryosphere programme of International Centre for Integrated Mountain Development (ICIMOD).

Air pollution in the Kathmandu valley and the Tarai presents a growing health crisis, with around 12 percent of Kathmandu’s population suffering from chronic respiratory diseases like asthma and pneumonia, threatening to reverse reductions in infant and child mortality, the report said.

Air pollution hazards will be worsened by more frequent hydrometeorological events such as droughts and heatwaves, with huge knock-on effects for the health of the population, the report said.

Comparing the National Board of Diseases report of Nepal between 2011 and 2021, in 2011, malnutrition was the number one cause of death but now it's air pollution.

Over 20 percent of deaths are now caused by air pollution in Nepal, which is around 42,000 deaths annually, said Dr Meghnath Dhimal, an environmental health scientist and chief research officer at Nepal Health Research Council.

As South Asia is suffering from heat waves, which increase non-communicable diseases, many people are now using more chemicals than before because once the temperature goes high, the effectiveness of the insecticide goes down, Dhimal said.

“As a result, more people are suffering from cancer, diabetes, malaises, and others,” he said.

Climate change, air pollution, and bio-diseases may result in the epidemic of the non-communicable disease. As climate change and air pollution all cause non-communicable diseases, this share may go up to 90 percent in the next five to ten years, Dhimal said.

Rob Fenn, the British ambassador to Nepal, said, “As the world grapples with climate change, Nepal is bearing the brunt despite contributing very little to global emissions.”

It is vital that global action supports Nepal’s resilience and growth, Fenn said. “The UK will remain a reliable partner in helping Nepal recover from shocks, adapt to challenges, and thrive,” he said.

“Our programmes will continue to invest in climate resilience, sustainable economic growth, and health systems that serve all communities.”