Amid fast deteriorating macroeconomic indicators, Nepal’s recovery of tourism and services exports has remained muted, a World Bank report noted. This has been coupled with extensive job losses and depleting buffers that have been used to meet large financing needs.
Tourism is one of the prominent industries in Nepal, providing a large number of employment as well as churning foreign exchange. In 2019, the tourism industry accounted for 8 per cent of the country’s GDP while garnering $700 million.
The World Bank in its report prescribed that Kathmandu must take bold policy response as the economic scars from two years of the pandemic run deep.
“Encouraging foreign direct investment (FDI) inflows, currently the lowest in the region, would not only support foreign exchange reserves but also make the private sector more competitive through skill transfers and know-how,” the World Bank said.
In 2020, with the outbreak of the Covid 19 pandemic, Nepal shut its borders which led to bleeding of the tourism sector.
While tourists have not just started to come into the country, it is far from the normal inflow.
In March this year, Nepal received 42,006 tourists via flights of whom 15,013 tourists were from India.
Hit by rising oil and commodity prices in the wake of the Russia-Ukraine conflict besides fast depleting foreign exchange reserves, Nepal has now announced restriction of imports of non-essential goods. These include cars, gold and cosmetics.
But analysts in Nepal said that this move may be counter-productive for the tourism sector.
Is Nepal heading for a full blown economic crisis?
Sri Lankan delegation to begin talks with IMF for $4 billion loan in Washington today