19th September 2025, Kathmandu
Economist Keshav Acharya argues that the interim government’s main responsibility is not to launch ambitious new development projects, but to manage resources effectively and ensure timely elections.
Government Should Focus Elections
Nepal News Bank spoke with him about the current state of Nepal’s economy in the aftermath of the Gen-Z movement and the steps the country must take to recover.
Current Situation After the Gen-Z Movement
According to Acharya, Nepal has faced unprecedented destruction of public and private infrastructure. The scale of damage, he says, is even greater than what the 2015 earthquake caused.
While physical structures can eventually be rebuilt, the destruction of official records, international agreements, and investment documents cannot be repaired. The estimated loss has reached “tens of trillions of rupees,” he notes.
Yet, Acharya sees a silver lining: the Gen-Z movement has opened the doors of politics, justice, and administration, previously shut by corruption and irresponsibility. This, he believes, has set the stage for improved governance in the coming decade.
Short- and Long-Term Economic Impact
Major businesses like Bhatbhateni Supermarket have been destroyed, with 5,000 jobs lost there alone.
The hotel and tourism sector has lost around 15,000–20,000 jobs.
Government revenue has also declined sharply.
Acharya says the government’s priority should be elections, peace, and security rather than new development programs. Alternative financial sources such as revenue, internal loans, and foreign investment will be difficult to rely on in the short term.
Risks to Investment and Business Confidence
Investment, Acharya explains, is driven by psychology and confidence. The destruction and instability have shaken private sector morale, both for domestic and foreign investors.
While some business leaders have shown commitment to rebuilding, most investors lack confidence in government protection, as even top institutions like Singha Durbar and the Supreme Court appeared insecure.
Unless the government restores trust and security, even existing investments could migrate abroad.
Immediate Priorities for the Interim Government
Conduct Peaceful and Fair Elections – Winning the trust of all political parties and citizens is critical.
Restore Law and Order – Recent violence and destruction created fear, discouraging market activity.
Use Resources Transparently and Efficiently – Complete ongoing projects at low cost, without corruption.
Engage Credible Leaders – Figures like Kulman Ghising and Rameshwor Khanal, who have shown integrity, should be brought into leadership roles.
Acharya stresses that the government’s role is not to launch new projects but to manage existing ones honestly.
On Long-Term Reforms
Since the interim government is transitional, it cannot make long-term commitments or new international agreements. Its focus should be:
Completing ongoing projects efficiently.
Canceling politically motivated small projects and redirecting about Rs. 100 billion toward productive areas.
Past scandals like the Melamchi Water Project delays and corruption in hydropower and infrastructure projects highlight the need for better management, not new commitments.
Reviving the Private Sector and Remittance Role
Acharya points out:
Banks face low deposit growth and stalled credit expansion.
Many businesses are blacklisted and unable to repay loans.
Investor confidence is deeply shaken.
Solutions include:
Restarting idle factories and businesses quickly.
Tax administration reform to treat honest taxpayers respectfully.
Strict action against vandals and arsonists from the recent protests, regardless of their political backing.
Only strong government resolve can rebuild trust, he says.
Budget Balance and Spending Strategy
Given the crisis, the government is prioritizing maintenance and reconstruction over new capital projects.
Repairing damaged police posts, public buildings, and roads will boost cash flow and economic activity.
With festivals like Dashain, Tihar, and Chhath approaching, higher consumption will stimulate circulation in the economy (each Rs. 100 spent can generate Rs. 400–500 in activity within a month).
Emergency Financial Measures
Extend tax payment deadlines and loan repayment periods to ease cash-flow issues.
Mobilize part of Nepal’s foreign exchange reserves (USD 20 billion) into quick-return projects like roads and hydropower to create jobs and revenue.
Plan spending carefully so that borrowed reserves can be repaid within 1–2 years.
Role of Local Governments
Acharya emphasizes that all 753 local governments must become engines of growth:
Identify skilled individuals and support them with loans and training.
Guarantee small loans for entrepreneurs at the local level.
Expand successful models like agriculture ambulances, milk subsidies, and buy-back guarantees nationwide.
Engage retired experts (engineers, veterinarians, agriculturists) on contract to support local development.
If local governments take this role seriously, employment, production, exports, and revenue can all increase significantly.
Conclusion
Economist Keshav Acharya concludes that the interim government’s role is not development construction but ensuring credible elections, restoring security, and managing existing projects transparently.
Rebuilding trust with the private sector and citizens will be the only path to long-term stability and prosperity in Nepal.
For more: Government Should Focus Elections