10 May Kathmandu Economists and business experts have said that Nepal’s falling private sector investment is putting pressure on revenue collection by the government and making the country more dependent on public debt.

With the government getting ready with policies and the national budget for the fiscal year 2026-27, restoring investor confidence has become critical for economic recovery and long-term financial stability, analysts warn.

The private sector, normally an important component of national investment, has seen a remarkable decline in recent years.

Government data reveals:

- Private sector investment fell from around 25 percent of total investment to nearly 19 percent last year

Political changes and efforts to revive the economy have not yet revived business confidence

Economists attribute the slowdown to a number of reasons including:

- Post-pandemic economic policy

- Low demand in the market

- Real estate bust

- Bureaucratic hurdles

- Uncertainty about government policies

Business leaders also say many investors are waiting on the sidelines for big commitments, waiting for the government’s next policy agenda and budget announcements.

The slump in private investment has directly hit government revenues.

Reports show that Nepal’s revenue collection has fallen short of the target over the years.

For the current fiscal year:

- It fixed revenue target at around Rs 1.48 trillion

- In mid-April, only about 60 percent of the annual target had been collected

Economists say: Less robust business activity equals:

- Reduced tax collection

- Reduction in industrial output

- Faster economic circulation

So the government is borrowing increasingly to meet even normal state expenditures.

Nepal’s public debt has risen steadily as revenue growth has deteriorated.

Latest government stats show:

- Public debt outstanding rose to nearly Rs 2.93 trillion at mid-April

- Public debt now stands at about 48 percent of Nepal’s GDP

Experts say increased reliance on debt could pose longer-term financial risks if economic growth and private investment do not pick up.

Fears are growing that the government could find itself struggling to balance:

- Development expenditure

- Repayment of loans

- Normal administrative expenses

Economists and business experts say Nepal needs urgent reforms to restore investor confidence.

The reforms suggested are:

- Streamlining business operations

- Lowering of bureaucratic barriers

- Improved tax administration

- Reinforcing policy stability

- Fighting corruption

- Promoting investment in the productivity sector

Analysts say investors prefer safe sectors like trade and services to long-term productive industries, as uncertainty and poor policy implementation weigh on sentiment.

The government has ambitious plans to make Nepal a much larger economy in the years ahead.

But experts caution that such goals may prove challenging without:

- High degree of private sector involvement

- More industrial investment

- Economic reforms that are sustainable

- Improved governance and implementation

There is widespread agreement that private investment is required to:

- Employment creation

- Economic development

Industry expansion

- Revenue creation

Now the deteriorating private investment climate in Nepal is emerging as one of the major economic concerns of the country.

Economists say that with pressure on government revenue and public debt continuing to rise, rebuilding business confidence and creating a more investment-friendly environment will be crucial for Nepal’s long-term economic stability and growth.

Tags: Nepal Economy, Public Debt Nepal, Private Investment Nepal, Nepal Revenue Crisis, Nepal Business News