THE NEPALI

As a young economist in Washington in the early 2000s, Swarnim Wagle spent his days at the World Bank writing reports about countries that could not implement them. Nepal, the landlocked Himalayan republic where he was born, featured often in the footnotes. Its problems were well-documented: a tax base propped up by the remittances of young men working in Qatar, capital budgets that went unspent year after year, and an economy captured by a small circle of businessmen with better access to ministers than to markets. Mr Wagle knew the diagnosis. He is now, at last, in a position to attempt the cure.

On March 27th he was sworn in as finance minister in the government of Balen Shah, a rapper-turned-mayor whose Rastriya Swatantra Party (RSP) swept Nepal’s elections with 182 of 275 parliamentary seats, the largest majority in the country’s modern democratic history. Mr Wagle, the party’s vice-chair and intellectual architect, holds degrees from the London School of Economics, Harvard and the Australian National University. He spent 25 years at the World Bank and the UNDP’s Asia-Pacific bureau, where he shaped economic policy for 36 countries. He is also, unusually for a Nepali technocrat of his pedigree, a politician with a growing personal mandate. His majority in the Tanahun-1 constituency expanded from 15,000 votes in a 2023 by-election to nearly 22,000 in March.

The RSP’s central promise is to grow Nepal’s economy from below $45bn today to $100bn within five to seven years, sustained by annual growth of 7%. Mr Wagle is not the first Nepali finance minister to arrive with large numbers and good intentions. He may, however, be the first one who has read enough economic history to know why his predecessors failed.

His structural thesis is that Nepal need not follow the conventional path of industrialisation. Landlocked, seismically active and chronically short of the infrastructure that factories require, it should instead leapfrog into a knowledge- and service-driven economy, using digital transformation, fintech and eco-tourism to generate growth that geography cannot strangle. IT exports, currently negligible, are to reach $30bn within a decade. A target of 30,000 megawatts of hydropower is meant to shift the economy from remittance-funded consumption toward something that actually produces tradeable goods. Some 1.2m domestic jobs are to be created, enough to make emigration a choice rather than a condition of existence.

The diagnosis behind this agenda is accurate even if the ambition is steep. Bank deposits have swelled to nearly Rs 7.7 trillion, yet credit expansion remains anaemic and investment demand subdued. Capital is piling up in vaults rather than building anything. Capital expenditure has slipped to just Rs 63.7bn, a figure that reflects not a shortage of money but a chronic inability to deploy it. Nepal is not a poor country pretending to be rich. It is a reasonably-resourced country governed, for decades, as though the principal purpose of the state were to distribute its proceeds among those who ran it.

On his first day in office Mr Wagle announced the abolition of the Revenue Investigation Department, long regarded as an instrument of harassment rather than compliance, and committed to scrapping or amending fifteen separate acts on the recommendations of a high-level reform commission. He promised 100-day, semi-annual and annual action plans. It was the behaviour of a man who understands that in Nepal, where announcements routinely substitute for action, the only way to be believed is to move before anyone can organise against you.

Budgets, however, are intentions. Between Mr Wagle’s intentions and a $100bn economy stand three institutions whose leaders he cannot instruct and whose cooperation he cannot assume.

The most consequential is Nepal Rastra Bank, whose governor, Biswo Nath Poudel, a UC Berkeley-trained economist, took office last May. On arriving he pledged to align monetary policy with the government’s fiscal priorities while preserving the independence of the central bank. Those two commitments are compatible only up to a point. Mr Wagle’s growth agenda requires credit to move from deposits into investment; the governor’s mandate requires it not move so fast as to stoke inflation. The finance minister will need to build the kind of working relationship, through regular consultations and shared targets, that makes coordination possible without making the central bank look like a subsidiary of the treasury. That requires trust, which requires time, which Mr Wagle is acutely short of.

The second figure is Gunakar Bhatta, the newly appointed vice-chair of the National Planning Commission. Dr Bhatta spent fifteen years at Nepal Rastra Bank, rising to executive director, before resigning in the expectation of becoming governor, a post that was blocked by political manoeuvring under the previous government despite what he had been led to believe were firm assurances. He is, in short, a man of considerable ability who has been treated badly by the establishment he served, and who now sits at the apex of the institution responsible for sequencing Mr Wagle’s entire investment programme. Handled well, he is a validator with unmatched knowledge of Nepal’s financial architecture. Handled poorly, he is a vice-chair who files meticulous plans that nobody implements.

The complication is that Poudel and Bhatta are not strangers to each other’s professional shadow. The Nepali Congress originally backed Dr Bhatta for the governor’s post before the appointment eventually went to Poudel after weeks of coalition deadlock. Two accomplished economists, one of whom was passed over for the job the other now holds, are being asked to align their institutions behind the country’s most ambitious economic programme in a generation. Mr Wagle must ensure that coordination meeting does not become a cold room.

His published vision calls for a competitive social market economy built on rule of law, meritocracy and production-led growth. The language is unimpeachable. The Competition Promotion and Market Protection Act has existed since 2007 and has been enforced approximately never. The syndicates and cartels that his manifesto promises to dismantle are not abstractions; they are organisations with lawyers, lobbyists and, until recently, ministers of their own.

His 100-day plan will be the first real signal. If it sets measurable outcomes, credit-to-GDP targets, disbursement rates for capital spending, time-bound reforms to the investment climate, it will suggest that Mr Wagle intends to be judged by results. If it reads like the vision documents his predecessors produced, investors will draw their own conclusions.

Nepal has never lacked for economists who understood its problems. It has lacked politicians willing to make enemies in fixing them. Mr Wagle, for the first time in a long while, has both the intellectual tools and the parliamentary numbers. Whether he also has the stomach for it is what the next hundred days will begin to reveal.