Core area “Sustainable economic development, training and employment” From poverty reduction to a productive economy
Nepal has made impressive progress in tackling poverty over the last 30 years. However, this success was achieved largely without sustainable domestic economic development, investment or job creation. As a result, around 20 per cent of the Nepalese population continues to live below the national poverty line. Although the Nepalese economy is growing steadily, by regional standards it remains weak and is failing to realise its potential.
Between 1996 and 2023, the real annual growth rate stood at only around 4.2 per cent – significantly lower than that of many regional neighbours. Productivity, exports and industrial value added are stagnating, which is hindering the creation of high-quality jobs.
Many young people are therefore looking for work abroad, which further hampers domestic growth. Consequently, a large proportion of the Nepalese population’s income is dependent on remittances from abroad, which account for around a quarter of gross domestic product. Whilst these payments do reduce poverty in the short term, they contribute little to sustainable value creation in the country and leave the economy vulnerable.
Goals for the sector
German development cooperation with Nepal focuses on stabilising state structures and ensuring that economic development is sustainable in the long term, with a view to creating more and better jobs. The aim is to secure the energy supply and improve the conditions for an inclusive, gender-responsive and climate-resilient economy. By building up knowledge – for example, on agricultural value chains – and improving access to financial services and strengthening the financial and fiscal basis, the aim is to empower state institutions, local authorities and economic actors to manage development processes independently.
Project examples
- Together with Nepalese and international partners, we are improving the framework conditions for gender-responsive and climate-resilient economic development. In particular, women-led businesses get better opportunities for growth, partnerships with the private sector are strengthened, and local authorities are empowered to provide targeted support for economic development.
- Reforms in the tax sector strengthen the capacity for democratic and inclusive action.
- In rural and semi-urban areas of Nepal, access to finance for small and medium-sized enterprises is being improved. Banks are being supported in offering suitable financial products. Attention is paid here to environmental and social sustainability.
As at: 27/07/2026