Nepal’s interim government has unveiled a wide-ranging economic relief and austerity package to address the massive destruction and disruption caused by the September 8-9 Gen Z movement, which left more than 70 people dead and caused billions in damage.

The estimated loss—covering damage to public and private properties, destruction of valuable documents, job cuts, and lost opportunities—is nearly equivalent to one and a half years of Nepal’s annual budget, or close to half of the country’s GDP, economists say.

The Cabinet-endorsed measures are aimed at stabilising fragile sectors, facilitating recovery, and ensuring continuity of economic activities in the wake of violence and arson that paralysed business operations, destroyed assets, and spread fear across the country.

According to initial assessment by the private sector, businesses alone lost around Rs80 billion, and nearly 15,000 direct jobs were affected. Among the hardest-hit industries was tourism.

The Hotel Association Nepal reported losses worth Rs25 billion, with more than two dozen hotels—including one under the global Hilton brand—set ablaze. “The destruction is unprecedented in Nepal’s modern history,” Deepak Raj Joshi, CEO of Nepal Tourism Board, said, adding that recovery would take years without robust government intervention.

The finance ministry’s draft outlines several concessions to help businesses resume operations. Businesses and professional institutions affected by vandalism, arson, or looting will be allowed to import furniture, machinery, and equipment for replacement at subsidised rates. These imports will get a 50 percent exemption on customs and excise duties, based on insurance survey reports and financial records.

Hotels that had previously used customs duty exemptions but suffered losses during the unrest will be eligible to access these exemptions again. However, the draft clarifies that no double benefits should be claimed, and all applications must be backed by insurance verification.

Additionally, taxpayers contributing to the newly established National Reconstruction Fund will be allowed to deduct such contributions when calculating taxable income.

For uninsured businesses that suffered losses, tax authorities will recognise valuations through simplified procedures, allowing deductions under the Income Tax Act and tax credits under the VAT Act.

To ease financial pressure, borrowers in directly affected sectors will receive extended repayment timelines for both principal and interest. Reconstruction loans will be available at the base interest rate plus a maximum premium of 0.5 percent.

For businesses whose commercial vehicles or transport equipment were destroyed, banks will provide loans with a loan-to-value ratio of up to 80 percent to facilitate replacement.

Similarly, concessional financing has been promised for businesses seeking to restart operations.

One of the key provisions of the relief package is the introduction of a Payroll Protection Scheme to ensure employees in affected businesses are not left jobless.

Companies that pay salaries through the banking system will be eligible for loans at the base rate plus a premium of 0.5 percent, with an additional 2 percent subsidy for six months, funded through the National Reconstruction Fund.

“This measure is designed to prevent mass layoffs and ensure that workers continue to get their wages while businesses rebuild,” the government draft notes.

Insurance companies have been directed to make advance payments of up to 50 percent of the estimated damage for insured vehicles, goods, buildings, and machinery based on preliminary survey reports.

Surveyors will be mobilised quickly to assess damage so that claims can be settled without delay, the draft says. Reinsurance support will also be introduced to fast-track settlements.

Alongside relief, the government has rolled out a stringent austerity drive to control expenditure.

Small-scale projects at provincial and local levels, particularly those with budget allocations outside their intended objectives, have been scrapped. All projects worth more than Rs1 million operating through consumer committees at the local and provincial levels have also been halted.

The government will no longer fund new projects launched this fiscal year, and budget allocations for projects will be tightly monitored. The contingency allocation for projects worth Rs1 billion has been reduced to 3 percent, and to 2 percent for larger projects.

Allowances and housing funds for employees who own homes have been withdrawn, and government offices in core city areas will instead operate out of rented buildings. The rules extend to Nepal’s diplomatic representatives abroad.

Hiring freezes are now in place across the federal, provincial, and local levels, with the exception of technical manpower deemed essential. All temporary employees have been laid off.

To cut costs, the number of officials allowed in the secretariat of federal and provincial governments has been capped at three. Similarly, delegations attending international conferences have been limited to 10, with only three members permitted if expenses are borne by the government.

Political leaders and civil servants will no longer be entitled to more than one government vehicle, and new vehicle purchases have been banned. The exception applies only to vehicles procured for election security purposes.

The government has also mandated comprehensive insurance coverage for all its vehicles and physical infrastructure, while banning the purchase of luxury goods and expensive electronic items for official use.

While the austerity measures are sweeping, the government has said ministries must seek approval from the finance ministry if budget cuts risk affecting social sectors such as education, health, or drinking water. This safeguard, officials say, ensures that basic services will not be compromised even as the state tightens its belt.

Government offices, banks, and tax agencies will remain open throughout most of the holiday season—except during Dashain—to facilitate trade, revenue collection, and recovery efforts.

By combining relief with austerity, the government hopes to rebuild confidence among the business community and international partners while addressing the deep economic scars left by the Gen Z movement.

Economists, however, warn that while the relief package provides short-term breathing space, recovery will depend heavily on how effectively these measures are implemented.

“The damages are colossal,” said Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry, while welcoming the new executive committee of the Society of Economic Journalists-Nepal (SEJON), on Tuesday.

“This is not just about reconstruction—it’s about restoring the private sector’s trust in the system.”

“After the Gen Z movement of September 8 and 9, there has been heavy damage to both government and private properties. We face the challenge of rising above this situation,” said Dhakal.

“However, the current government, in a short period of time, has announced relief packages in line with the private sector’s expectations, which has helped boost morale. The federation has taken this positively.”