- Prime Minister Balen Shah intervened directly to restore investor confidence following a significant decline in the Nepal Stock Exchange (NEPSE) index.
- His involvement signals dissatisfaction with the Finance Ministry’s failure to stabilize the economy and effectively support private sector investment.
- Investors responded positively with a market rise but continue demanding structural reforms, including tax adjustments and modernized trading infrastructure.
- Sustainable economic recovery depends on translating high-level commitments into predictable policies that address the nation's current confidence deficit.
Government Takes Steps to Restore Market Confidence Amid Rising Questions Over Economic Management and Finance Ministry’s Policy Approach
Kathmandu, Nepal: Nepal’s capital market has remained under sustained pressure since the formation of the current government, with investor confidence gradually weakening and concerns emerging over the government’s economic policy direction. The Nepal Stock Exchange (NEPSE) index, which had risen close to the 3,000-point level, has declined toward the 2,500-point range, resulting in a significant reduction in market capitalisation and dampening investor enthusiasm.
The prolonged decline in the stock market has raised concerns beyond short-term market fluctuations. Economic analysts and private sector representatives argue that the weakening performance of the capital market reflects broader challenges related to investor sentiment, policy uncertainty, and declining confidence in the overall business environment.
The slowdown in capital market activities has affected government revenue collection, as reduced trading volume directly impacts revenue generated through capital gains tax, transaction fees, and other market-related sources. At the same time, concerns over capital outflows and declining private investment have increased pressure on the government to introduce confidence-building measures.
Nepal’s economic ecosystem is closely interconnected, with the banking sector, private sector, and capital market influencing one another. A decline in confidence in one area often creates wider economic consequences. When investors delay investment decisions, businesses postpone expansion plans, industries reduce new projects, employment opportunities decline, and overall economic activity slows.
Therefore, economists have increasingly characterised the current situation not merely as a market correction but as a broader crisis of economic confidence and investor sentiment.
Prime Minister Takes Direct Initiative to Engage Capital Market Stakeholders
Amid growing concerns, Prime Minister Balen Shah held a direct discussion with major stakeholders of Nepal’s capital market, including regulatory authorities, stockbrokers, institutional investors, and individual investors.
The meeting, which lasted approximately one hour, was officially presented as a consultation aimed at identifying measures to strengthen and reform the capital market. However, political and economic observers viewed the Prime Minister’s direct involvement as a significant development, indicating that restoring investor confidence has become a priority at the highest level of government.
During the meeting, Prime Minister Shah urged investors to avoid making decisions based on rumours, speculation, or market panic. He encouraged them to rely on factual information, market analysis, and a long-term perspective while making investment decisions.
The Prime Minister also clarified that the government is not opposed to the private sector and emphasised that a strong capital market is essential for economic development, efficient mobilisation of domestic capital, expansion of businesses, employment generation, and sustainable revenue growth.
Market analysts, however, believe that the Prime Minister’s personal involvement itself carries a significant economic and political message. According to them, direct engagement by the head of government demonstrates recognition of the seriousness of the confidence deficit affecting the economy.
Why Did the Prime Minister Personally Intervene?
Traditionally, discussions related to economic policy, private sector concerns, and investor issues are led by the Ministry of Finance. The ministry plays a central role in coordinating economic policies and maintaining relations between the government and the private sector.
However, Prime Minister Shah’s increasing involvement in economic discussions suggests that the government is attempting to address concerns through direct intervention at the highest political level.
In recent weeks, the Prime Minister has intensified engagement with private sector organisations, including the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the Confederation of Nepalese Industries (CNI), and the Nepal Chamber of Commerce.
The meeting with capital market stakeholders was part of this broader effort to rebuild trust and improve communication between the government and the business community.
Political analysts argue that the Prime Minister’s primary message to investors is clear: the government is not hostile toward private enterprise and remains committed to creating a favourable investment environment.
They believe the government is attempting to reverse the growing perception that inconsistent policies and unclear government messaging have created uncertainty among businesses and investors.
Growing Criticism of Finance Ministry’s Economic Management
While the Prime Minister has become increasingly active in engaging with the private sector, criticism has also intensified regarding the working approach and policy decisions of Finance Minister Swarnim Wagle.
According to government sources, Prime Minister Shah has expressed dissatisfaction with the Finance Ministry’s effectiveness in improving investor confidence and creating a more supportive environment for private investment.
Sources claim that the Finance Ministry was expected to take the lead in strengthening economic confidence, introducing investor-friendly policies, and improving government-business relations. However, the expected improvement has not been achieved, prompting the Prime Minister to become more directly involved.
Finance Minister Wagle, who previously worked with international economic institutions and has established a reputation as an economist and policy expert, has faced criticism from sections of the private sector, investors, and economic stakeholders.
Critics argue that although his academic and professional background is widely recognised, effective economic management also requires practical policy implementation, clear communication, and the ability to build confidence among businesses and investors.
Concerns have particularly focused on taxation policies, capital gains tax provisions, government communication, and the overall approach toward private sector development.
Some business leaders argue that certain policy decisions and public statements from the Finance Ministry have contributed to uncertainty rather than strengthening market confidence.
Economic Challenge Is Not Only Financial but Also Psychological
Economists emphasise that investment decisions are driven not only by financial conditions but also by confidence in the economic environment.
According to experts, even when banks have adequate liquidity and interest rates are favourable, investment will not increase unless businesses believe that government policies are stable, predictable, and supportive.
Nepal’s current economic situation reflects this challenge. Despite sufficient liquidity in the banking system, private sector borrowing and investment expansion remain limited. Industries have been cautious about increasing production capacity, while activity in the capital market has weakened.
Economists argue that Nepal’s current challenge is not merely a shortage of financial resources but a shortage of confidence.
A stable policy framework, predictable regulations, respect for entrepreneurship, and constructive engagement between the government and private sector are essential for restoring economic momentum.
Market Responds Positively to Prime Minister’s Initiative
Following the Prime Minister’s meeting with capital market stakeholders, the NEPSE index increased by 41 points on the same trading day.
Many investors and market observers interpreted the rise as a positive psychological response to the government’s renewed attention toward the capital market.
The increase indicated that investors welcomed the Prime Minister’s intervention and viewed it as a positive signal of the government’s commitment to addressing market concerns.
However, analysts caution that a single day’s market recovery cannot be considered evidence of a complete restoration of investor confidence.
They argue that sustainable improvement will require concrete policy reforms and effective implementation rather than temporary optimism generated by political statements.
Major Reform Demands from Investors
During the discussion, investors presented several policy recommendations aimed at strengthening Nepal’s capital market and improving investor confidence.
Key demands included:
Reforming the capital gains tax system by allowing adjustment of profits and losses before taxation.
Expanding margin lending facilities.
Introducing intraday trading.
Implementing securities lending and borrowing mechanisms.
Restructuring and modernising NEPSE.
Strengthening the implementation of the book-building system.
Increasing institutional participation in the capital market.
Reforming the IPO issuance process.
Expanding limits on loans against share collateral.
Enhancing regulatory capacity and improving market infrastructure.
Investors argue that these reforms are necessary to make Nepal’s capital market more transparent, competitive, and attractive to both domestic and institutional investors.
Implementation Will Determine the Success of Government Initiatives
Although the dialogue between the Prime Minister and capital market stakeholders has created a positive environment, analysts say the real challenge lies in implementation.
The responsibility now rests with key institutions, including the Ministry of Finance, Securities Board of Nepal, Nepal Stock Exchange, Nepal Rastra Bank, and other regulatory authorities.
Experts argue that unless government commitments are translated into concrete policies, timely decisions, and institutional reforms, investor confidence may not recover sustainably.
The market requires more than short-term optimism; it requires a long-term foundation built on policy stability, regulatory reform, institutional credibility, and mutual trust between the government and private sector.
Economic Initiative with Political Implications
Prime Minister Shah’s direct engagement with capital market stakeholders carries both economic and political significance.
From an economic perspective, it reflects an effort to address declining investor confidence and revive market sentiment. Politically, it signals the government’s attempt to reassure the private sector that economic growth and investment promotion remain priorities.
Meanwhile, reports of dissatisfaction between the Prime Minister and Finance Minister regarding economic management have generated discussion within political and economic circles. However, neither the Prime Minister nor the Finance Minister has officially confirmed any internal disagreement.
For now, the government’s greatest challenge is to transform political commitment into effective economic reforms capable of restoring investor confidence, encouraging private investment, and strengthening Nepal’s economic outlook.
