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Nepal's Economy Faces Divergent Growth Forecasts Amidst Tax Disputes and DFI Investments

Photo · katmandujournal.com

Nepal's economic growth forecasts for the fiscal year 2025/26 are showing significant divergence, with the World Bank predicting 2.3%, the Asian Development Bank 2.7%, and the National Statistics Office 3.85%. Meanwhile, the Chinese app TikTok is in a tax dispute with Nepalese authorities over unpaid Value Added Tax (VAT) for the current fiscal year, despite having paid VAT in previous years. Development Finance Institutions (DFIs) have collectively invested $1.09 billion in Nepal's private sector between 2014 and 2023, with a significant portion directed towards hydropower and commercial banks like NMB Bank.

• The discrepancy in economic growth forecasts is attributed partly to technical methodology differences and partly to assumptions about geopolitical events, such as potential disruptions in the Middle East affecting oil prices and tourism.
• TikTok argues that its VAT obligations are met through agreements with Apple's App Store and Google Play, a position questioned by Nepal's Ministry of Finance.
• The largest DFI investment was a $453 million debt package in 2019 for the Upper Trishuli-1 hydropower plant, while other investments have targeted Nepal's banking sector and internet service providers.
• Nepal's government plans to implement an integrated 'Green Tax' system starting in the fiscal year 2026/27, consolidating existing pollution and infrastructure fees.
• The World Bank identifies air pollution as the leading health risk factor in Nepal, contributing to over 41,000 premature deaths annually.