Nepal is at a critical juncture in its economic development. The government has launched an ambitious program of legislative reforms that many analysts have dubbed a “second wave” of liberalization. This process is not happening in a vacuum, but under pressure from powerful internal and external factors that are forcing the political leadership to act decisively and quickly. Understanding these drivers is key to assessing both the potential opportunities and the significant risks that the new laws pose.

The main catalyst for the reforms was Nepal's upcoming graduation from the list of least developed countries (LDCs), scheduled for November 2026. While this transition is a symbol of national progress, it also means the loss of preferential trade tariffs and other benefits that have long supported the country’s economy. As a result, Nepal is being forced to urgently shift from a model dependent on international aid to one that is self-sufficient, driven by trade and private investment. Added to this is the need to recover from the economic shocks caused by the COVID-19 pandemic and address systemic issues such as the growing trade deficit.