The economy of Nepal, classified as a least developed country (LDC) by the United Nations, faces a unique set of challenges and opportunities. Gross domestic product (GDP) per capita is estimated at $1,460 (nominal) and $5,720 (PPP) in 2025.3The economy grew at an average annual rate of 4.2% in real terms between 1996 and 2023, a respectable rate given internal conflicts and numerous external shocks, but lagging behind that of its regional peers. Forecasts for the 2023/24 financial year indicated growth of 3.3%, and for the 2024/25 financial year, 4.5%.

A key feature of the Nepalese economy is its high dependence on remittances from migrant workers. By 2023, remittances accounted for about a quarter of Nepal’s GDP1and were projected to exceed 30% of GDP in fiscal year 2014. During the first nine months of the fiscal year 2024/25, remittances reached NPR 1,191.31 billion (approximately US$8.74 billion), an increase of 10% in rupee terms compared to the same period of the previous year. According to the World Bank, in 2023, remittances accounted for 26.89% of GDP. This significant reliance on remittances plays a key role in supporting the economy and reducing poverty. However, this economic structure also has a downside. Large inflows of foreign exchange in the form of remittances, while critical for poverty reduction and ongoing economic stability, can inadvertently hinder the development of a competitive domestic manufacturing sector. This phenomenon, similar to the “Dutch disease,” can lead to real exchange rate appreciation (as discussed in1 as a deterrent to exports), making local goods more expensive relative to imported ones and hampering export competitiveness. Thus, one of the key pillars of Nepal’s economy (remittances) may indirectly undermine efforts to strengthen domestic supply chains and reduce import dependence in the consumer goods sector, creating a difficult policy dilemma.