Job-Driven Growth in Nepal

Nepal’s Path to Sustainable Growth and Job Creation

Nepal has made remarkable progress in reducing poverty over the past few decades, with significant improvements in infrastructure, education, health, and digital connectivity. These achievements have laid a strong foundation for further development. However, the next phase of growth must focus on sustainable, inclusive, and transformative development. This transition requires creating jobs, especially for youth and women, modernizing agriculture, improving urban infrastructure, enhancing service delivery, and building resilience against natural disasters and climate risks.

Nepal’s young workforce is expected to reach 22 million by 2030, making it a critical asset for driving economic growth. The urgency to create jobs that reduce poverty and support national development has never been greater. Despite this potential, many Nepalis still seek opportunities abroad, relying on remittances that sustain households but do not strengthen the domestic economy. It is time to shift this narrative and focus on creating an environment where Nepalis can stay, contribute, and thrive.

The Job Creation Conundrum

Today, 82 percent of Nepal’s workforce is engaged in informal employment, one of the highest rates in the region. This statistic reflects deeper challenges, including limited job opportunities and structural barriers that hinder progress. Real exports have stagnated, manufacturing has declined, tourism remains underdeveloped, and hydropower, despite its potential, has not fully realized its promise. Weak infrastructure, regulatory bottlenecks, limited connectivity, and gaps in digital literacy further constrain Nepal’s competitiveness.

The human capital story is equally concerning. A child born in Nepal today is expected to achieve only half of their potential productivity due to gaps in education, nutrition, and job readiness. Women face even greater challenges, with a labor force participation rate of 27.6 percent and limited access to quality jobs and skills development. These disparities underscore the need for targeted interventions to unlock the full potential of Nepal’s population.

Urbanization and Infrastructure Development

Rapid urbanization is reshaping Nepal, with cities like Kathmandu emerging as potential hubs of opportunity. These urban centers could drive investment and job creation if properly planned and developed. However, unplanned growth and underdeveloped infrastructure limit their potential. Strategic planning and investment in urban infrastructure are essential to harness the full promise of urbanization.

With the right investments and reforms, Nepal can unlock job-creating growth across various sectors. Here are some key strategies:

• Build Human Capital: Equip Nepalis, especially women and young people, with the education and skills needed to lead in a modern economy. Expanding access to quality education, vocational training, and entrepreneurship programs can bridge the skills gap, boost productivity, and unleash innovation.
• Empower the Private Sector: Small and medium enterprises (SMEs), which make up 90 percent of industrial firms and employ more than half the workforce, are the backbone of Nepal’s economy. Strengthening their foundation and improving the business environment can catalyze job creation, investment, and long-term economic resilience.
• Focus on Strategic Sectors: From the majestic Himalayas to vast hydropower potential and a growing digital economy, Nepal holds untapped sources of sustainable growth. Targeted investment in tourism, energy, and digital services can spark new and green jobs, provided environmental and social safeguards remain central to development.
• Strengthen Local Capacity: Even the most ambitious plans will fall short without effective implementation. Investing in local governance, improving service delivery, and building institutions that turn policy into real-world results will ensure that progress reaches those who need it most.

A New Roadmap for Impact

Maximizing these opportunities will require bold and decisive actions. The World Bank Group (WBG) is committed to creating more and better jobs, which is central to its mission. The new Country Partnership Framework (CPF) focuses on job-creating growth, resilience to natural disasters, and aligns with the Nepali government’s 16th Plan.

The CPF prioritizes four areas for sustainable, inclusive development: improving the business environment to boost competitiveness and investment, advancing urban development and tourism to create jobs, expanding digital connectivity to drive innovation and competitiveness, and strengthening disaster resilience to safeguard lives and infrastructure against climate risks.

Unlocking Nepal’s economic potential relies on a strong foundation, with the private sector playing a leading role. The International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the World Bank will drive private sector solutions and capital inflows to support job creation and key sectors such as clean air and tourism. Achieving this requires reforms, supported by World Bank policies and IFC advisory efforts, to enable private enterprise growth and investment, backed by WBG guarantees where needed.

Each of the World Bank Group institutions brings instruments and expertise to support Nepal’s economic transformation. The World Bank aims to make available $1.9 billion through development policy financing, performance-based operations, programmatic approaches, investment project financing, and analytical and advisory services. IFC plans to invest $750 million in Nepal, focusing on MSME on-lending (including women), hospitality, energy, transport, and infrastructure. It aims to expand its pipeline through advisory services that provide technical expertise and strategic guidance to government and businesses to attract private investment, one WBG collaboration and innovative financing, contingent on reforms to enable private capital and greater private sector participation. MIGA has already provided a guarantee for a hydropower project in the country. Nepal can further leverage guarantees to attract foreign direct investment in key infrastructure sectors.

Nepal is on the precipice of a new era of progress, with a young, dynamic population; a private sector with immense growth potential; and a government committed to reform. The moment to act is now. The World Bank Group stands shoulder-to-shoulder with Nepal to seize this opportunity, unlocking its vast potential, empowering its people, and charting a path toward enduring prosperity and resilience.