Nepal is unlikely to face a severe economic crisis

Significance

Some observers fear Nepal could soon end up in a full-blown economic crisis such as that now affecting Sri Lanka, which recently suspended external debt servicing. Kathmandu, like Colombo, is among the regional players over which India and China vie for influence.

Impacts

• While Kathmandu will continue to pursue balanced diplomacy with India and China, Delhi will remain its most important partner.
• Ongoing political instability could hinder economic decision-making.
• As in other countries in the region and beyond, Nepal will have to contend with stagflation in the short term at least.