Can Nepal reach middle-income status without a working manufacturing sector?

katmandujournal.com · 4 days ago

Nepal's economy faces a sustainability challenge as industrial output has declined significantly while consumption is heavily reliant on remittances from overseas workers. This reliance has led to an overvalued currency, making imports cheaper and domestic production more expensive, resulting in a large trade deficit. Despite efforts to expand hydropower and services like tourism and IT, these sectors have limitations in absorbing the growing labor force and generating sufficient foreign exchange. The country's economic model, driven by consumption and remittances, is vulnerable to external shocks, mirroring the crisis faced by Sri Lanka.