Time to relax capital controls

The question for Nepal is not whether to relax capital controls, but rather when and how to do so.

Nepal’s journey towards global integration is still at an early stage. Until the 1950s, the landlocked country remained largely isolated from the rest of the world. A major turning point was during the balance of payments crisis from 1982 to 1985, which pushed foreign reserves as low as barely three months of import cover. Out of that crisis, Nepal adopted liberalisation, privatisation and globalisation as part of its first generation of reforms under the International Monetary Fund’s Structural Adjustment Programme in the 1990s. So far, Nepal’s globalisation story has been shaped more by migration than by trade or investment. With Nepal set to graduate from Least Developed Country status in 2026, relaxing capital controls is gaining momentum to unlock the next phase of globalisation.