Nepal country brief

Political overview

Nepal is undergoing a period of significant political transition. In 2006, a Comprehensive Peace Accord ended a decade of civil war. In 2008, Nepal became a republic ending 240 years of monarchy. Then in 2015, after almost a decade of short-term governments, Nepal's new constitution established a secular democratic republic with a federal system of three tiers of government: local, provincial and federal. The president, Bidhya Devi Bhandari, was elected by parliament in October 2015, soon after the ratification of the constitution.

Following the 2017 provincial and national elections, a coalition centered on the Communist Party of Nepal-United Marxist Leninist (CPN-UML) and the Communist Party of Nepal-Maoist Center (CPN-Maoist) decisively won government against the incumbent Nepal Congress Party. Formation of the new government commenced on 15 February 2018 with the swearing in of Khadga Prasad (KP) Sharma Oli from the CPN-UML as the 41st prime minister of Nepal.  Prime Minister Oli subsequently appointed Pradeep Kumar Gyawali as Foreign Minister.

Nepal – Heads of Government listing

Economic overview

Nepal remains one of the poorest countries in South Asia, with an estimated 25 per cent of Nepalis living below a poverty line of USD1.25/day. Nepal faces multiple constraints to economic growth, including low levels of foreign direct investment and poor infrastructure. Nepal's economic growth has been adversely affected by political uncertainty and natural disasters including the 2015 earthquakes. The focus on political transition to democracy and attainment of peace has meant that inadequate attention has been given to economic and other reforms that could improve the investment climate, stimulate growth and create more private sector jobs.

Poverty in Nepal is complex and multidimensional, influenced by socio-cultural and geographical barriers including gender, ethnicity, caste, disability, rural isolation and shocks from natural disasters. Over 60 per cent of the population is highly dependent on subsistence agriculture. Remittances are also a key survival strategy for more than half of Nepal's households, contributing around 30 per cent of national Gross Domestic Product (GDP). Every year, around 500,000 Nepalis go overseas to work.

It is widely anticipated that federalism will deliver a period of stability and economic growth for Nepal. A durable political settlement is key to boosting investor confidence, spurring economic growth and supporting the Government of Nepal's aspiration to transition from Least Developed Country to Developing Country Status by 2022. 

Bilateral relationship

Australia and Nepal celebrated 50 years of diplomatic relations in 2010, though Australia's relationship with Nepal predates the establishment of diplomatic links in 1960. Over the years, the Australian Government and private sector have contributed to the economic and social development of Nepal through activities and assistance in the fields of education, health, hydroelectricity, sustainable forestry management, civil aviation, and livestock and grain management.

Australia's relations with Nepal continue to strengthen people-to-people links. Over 50,000 people born in Nepal now reside in Australia, up from 4,350 in 2006. Additionally, Nepal is a popular short-term destination for Australian tourists. In the year to March 2018 over 31,000 Australian residents visited Nepal, an increase of 20 per cent over the previous year.

The number of private Nepalese students studying in Australia is increasing rapidly. The number of Nepali students in Australia increased over 30 per cent between 2016 and 2017. In 2017, over 28,000 Nepali students studied in Australia. The Association of Australian Nepal Alumni is very active. There are also active Nepal-Australia Friendship societies in both countries.

Australia remains a committed development partner to Nepal. Australia provided more than $28 million to Nepal following the devastating earthquakes in April and May 2015. Australia's support provided urgently needed water, sanitation, shelter, medical supplies and food as well as longer-term recovery activities focused on helping communities revive their businesses and generate much-needed income, assisting children to return to school, rebuilding better and safer schools and supporting community mediation. In 2018-19, Australia will provide an estimated $30.6 million in official development assistance. An Aid Investment Plan Nepal 2016-2020 was published in 2017.

Bilateral economic and trade relationship

Australia's trade with Nepal is small, but there is potential for growth in hydropower, tourism and infrastructure development. There is strong potential for growth in the delivery of education services. Behind China and India, Nepal is Australia's third largest source country for international students. Other areas in which there are increasing commercial opportunities following deregulation include civil aviation and telecommunications. Two-way merchandise trade in 2016-17 totaled $57 million, with exports to Nepal valued at $50 million. Principal exports to Nepal are vegetables and refined petroleum. Australia also exports food and beverages including wine. Australia's main imports are floor coverings and clothing.

Last Updated: 9 July 2018