Towards Resilient Public Finance: National Assessment of Fiscal Risks in Critical Infrastructure Sectors in Nepal
Nepal faces recurrent fiscal risks from disasters due to its fragile Himalayan geography and climate vulnerability. Earthquakes, floods, and landslides repeatedly damage infrastructure, displace communities, and strain public finances. The 2015 Gorkha earthquake caused $71 billion in losses, while recent floods and quakes added hundreds of millions in reconstruction costs.
Annual average losses reach $325 million from earthquakes and $220 million from floods. Catastrophe modelling shows energy and transport sectors are most exposed, with landslides alone causing over $101 million annually. Current disaster funds, about $35 million nationally plus smaller reserves, fall far short of needs, even with the $150 million World Bank Cat DDO. Funding gaps persist, especially for high-severity events.
The report recommends layered risk financing, stronger reserves, resilient infrastructure investment, and improved sub-national data to safeguard fiscal stability and development progress.
Key points
- Disasters sharply increase government spending, creating immediate fiscal pressures.
- Energy and transport infrastructure face the highest exposure and recurring loss risks.
- Existing disaster financing mechanisms are insufficient for major catastrophic events.
- Climate change will intensify hazards, increasing long-term fiscal vulnerabilities.
- Adopt layered financing using reserves, insurance, and contingent credit instruments.
- Invest in resilient infrastructure and improve data for risk-informed planning.
