In a dramatic shift for Nepal, the U.S. Agency for International Development (USAID) found its funding significantly curtailed under the Department of Government Efficiency, overseen by Elon Musk. The cuts amounted to an estimated $329 million in humanitarian aid, a loss that has reverberated through one of South Asia's most promising yet challenging economies. The decision has left many in Nepal, especially those in the humanitarian sector, grappling with the fallout.
A Humanitarian Crisis Unfolds
Stuti Basnyet, the former acting program office director for USAID in Nepal since 2024, reflects on the emotional turmoil that followed the funding cuts. “Everyone went through denial first that this was even happening, to just deep grievance at how it was being done,” she revealed in an interview with Fortune. The implications were severe; the closure of USAID's operations led to an estimated 30,000 direct job losses across the country. Vital projects aimed at improving education and healthcare now hung in the balance, leaving Basnyet and others scrambling to fill the void.
Educational initiatives, especially those focused on early-grade reading and teacher training across Nepal's 35 districts, were among the first casualties of the funding cuts. In a country where education is already precarious, the loss of these resources has left many wondering how to piece together a sustainable future.
The Search for Alternatives
Faced with the daunting challenge of rebuilding without the steady flow of aid that had supported Nepal since 1951, Basnyet and her colleagues turned to the private sector for solutions. The country's economic landscape is complex — classified as a lower-middle-income country by the World Bank, Nepal's GDP stands at $1,447, ranking 124th out of 145 countries tracked by the Harvard Kennedy School Growth Lab. Yet, nestled between the economic powerhouses of India and China, Nepal is bursting with potential.
With over 40% of its population aged between 16 and 40, Nepal is experiencing a "youth bulge" that presents both challenges and opportunities. The private sector has begun to pivot, looking toward innovative solutions to revitalize the economy. Basnyet co-founded Aadyanta Advisory, a strategic advisory firm aimed at supporting nearly 400 young Nepali innovators and founders in just one year. This initiative has played a pivotal role in jumpstarting Nepal's industrial push, emphasizing locally led and globally connected economic development.
The Rise of Nepal's Tech Sector
Amidst this backdrop of adversity, a burgeoning tech hub is emerging in Nepal. Pukar Hamal, founder and CEO of SecurityPal, a San Francisco-based cyber security firm, describes Kathmandu as the "Silicon Peaks." This Himalayan tech hub is slowly gaining recognition, with a growing number of U.S.-based companies establishing operations in the country. As Hamal succinctly puts it, “I wouldn’t say Nepal is most people’s first choice destination, but I think that’s changing.”
The potential for growth in Nepal is immense. The country boasts more than 6,000 rivers and streams, providing an abundance of hydropower resources. Despite having an estimated 100,000 megawatts of hydropower potential, only 5,000 megawatts have been tapped so far. As technology improves and infrastructure develops, the energy sector could catalyze further economic growth.
A New Economic Model
The narrative of Nepal's economy has evolved significantly since the 1990s, when it actively sought foreign aid to prop up a nascent private sector. Amir Thapa, executive director of the American Chamber of Commerce in Nepal (AmCham Nepal), notes the unsustainability of past reliance on grants. "When USAID was gone, we took that as an opportunity," Thapa shared. "We knew that there was going to be a void to create a partnership with the private sector here in Nepal."
This pivot is evident in the increasing presence of large U.S. corporations, such as Coca-Cola and MetLife, which have established operations in Nepal, contributing to job creation. AmCham's membership has grown from 42 to 72 members in just two years, reflecting the increasing interest in Nepal as a viable business destination. In 2025, Nepal exported about $1 billion worth of information technology products, with ambitions to escalate that figure to $20 billion over the next decade.
The Role of Youth in Economic Transformation
As Nepal's economic landscape shifts, much of the future depends on the youth. Thapa emphasizes the hunger and ambition of Nepali youngsters, noting their desire to prove themselves in a competitive global market. However, the country faces a paradox: while young people are eager to work, many are leaving for foreign opportunities. Data from Rastriya Shramik Mahasangh Nepal indicates that around 1,500 young people depart daily for work abroad, seeking better prospects.
This exodus is particularly pressing given that many agricultural jobs in Nepal pay about 67% less than the national average. The hope is that the growth of the tech sector can provide sufficient opportunities to retain this dynamic workforce.
Political Dynamics and a New Generation of Leadership
The political landscape in Nepal has also undergone significant changes, particularly following the rise of Prime Minister Balen Shah, a former rapper elected amid youth-led protests against corruption and censorship. Shah's administration has brought a wave of optimism, with many of his ministers being under 40 years old. Their focus on bolstering private-sector partnerships and revitalizing state-owned industries signals a potential turning point for the nation.
However, challenges persist. Shah faces immediate tests, including the government's response to catastrophic flash floods in August that killed 1,300 and left 5,000 missing. The bureaucratic delays in distributing resources have drawn criticism, leading to renewed calls for effective governance and accountability.
The Interplay of Public and Private Sectors
The floods have illustrated the delicate balance between Nepal's public and private sectors during this transition phase. As Basnyet points out, “Neither government nor the private sector can carry the whole chain of risk.” For example, while telecom companies can alert millions in the event of a disaster, they cannot predict natural calamities like glacier collapses. This highlights the need for a more integrated approach to disaster preparedness, one that involves both sectors collaboratively.
The Future: Building an Independent Economy
Despite the evident challenges, Basnyet remains hopeful for Nepal's future, advocating against a return to aid dependence. She argues for better utilization of public resources, mobilization of domestic capital, and a stronger partnership with the diaspora and philanthropic organizations. The goal, she asserts, is to create a self-sufficient economy that can withstand external shocks.
“I don’t think the lesson is that Nepal should remain aid-dependent. It should not,” she explains. As Nepal navigates this transitional period, the focus will likely shift towards innovation, entrepreneurship, and youth empowerment, fostering a resilient economy that can sustain its growth independently.
Conclusion: A New Dawn for Nepal
As Nepal stands at this critical juncture, the interplay of political will, youthful ambition, and a burgeoning tech sector could spell a new chapter in its economic history. While the loss of aid from USAID poses significant challenges, it also catalyzes a transformation that could lead to a more self-reliant and robust economy. The resilience of the Nepali people, coupled with the drive for innovation, indicates that the country's best days may still lie ahead. As the narrative unfolds, it will be essential to maintain a balance between leveraging international support and cultivating an independent economic identity.
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