By Our Reporter

The World Bank (WB) has said that Nepal’s current growth model which is heavily dependent on remittances and consumption has proven resilient but insufficient to meet the country’s ambitious development targets.

"While remittances have buoyed private consumption and reduced poverty, they have not translated into substantial job creation or productivity gains across key economic sectors," the WB concluded in its latest report on Nepal country economic memorandum 2025 titled 'Unlocking Nepal's growth potential' launched in Kathmandu on Monday.

According to the multilateral donor, this model, coupled with structural limitations such as low export competitiveness, limited industrial output, and dependency on informal labour, constrains Nepal’s potential to achieve sustained higher growth rates.

To break this cycle and enhance growth, significant policy reforms are essential to shift the economy toward more dynamic and sustainable drivers of growth, it suggested.

The five-yearly report concluded that Nepal has achieved remarkable success in poverty reduction, nearly eradicating extreme poverty, largely driven by remittances. To strengthen future growth, Nepal should prioritise policy actions that unlock domestic opportunities, it said.

Despite progress, Nepal’s economic growth lags regional peers. Nepal's economy grew at an average annual real rate of just 4.2 per cent between 1996 and 2023, ranking sixth out of eight South Asian nations.

According to the WB, structural challenges such as low productivity, declining exports, and a stagnant industrial sector have held back the economy and led to slow job creation in non-agriculture sectors.

“Nepal's success in poverty reduction is impressive, but its economic potential remains largely untapped,” said David Sislen, World Bank Division Country Director for the Maldives, Nepal, and Sri Lanka. “Nepal has significant potential to drive stronger growth and create jobs by implementing key reforms to increase the returns from migration, boost exports, use hydropower efficiently, and boost digitalisation.”

Speaking on the occasion, Vice-Chairman of the National Planning Commission (NPC), Prof. Dr. Shiva Raj Adhikari, said that conventional practices were not sufficient to achieve the rapid and sustained growth targets, adding the country needs to be innovative and implement sustainable development initiatives.

The Country Memorandum 2025 suggested that integrating migration into national development, job creation, and poverty reduction strategies will provide a platform to work towards a systematic and institutionalised migration system.This is needed to enhance the returns from migration.