The work to reconstruct the commercial routes in the areas devastated by the destructive flood of September 10, which swept through the Bhotekoshi River in Rasuwa, has begun. The Nepal Army has constructed a new bridge over the Tadi River in Nuwakot.
Nepal is currently struggling to emerge from an economic crisis triggered by a sudden natural disaster. Government officials estimate that rebuilding the infrastructure damaged by the floods in riverine areas of Rasuwa, Nuwakot, Dhading and other districts alone could cost at least US$5 billion. However, experts say this estimate does not capture the indirect economic consequences of losing critical infrastructure used for travel and the transportation of goods.
“This sudden flood was not a disaster confined to a single sector,” said Nischal Dhungel, a non-resident fellow at the Nepal Institute for Policy Research who writes on Nepal’s economy. “Its effects extend from farmland to hydropower projects, commercial corridors, tourism, businesses and the insurance sector. The losses suffered by individual households are also directly connected to the recovery of the national economy.”
Following the Rasuwa floods, several major countries, including the United States, China and India, have pledged humanitarian and economic assistance to Nepal. Nepal has appealed for additional international support to help it recover from the disaster. There are growing concerns that similar disasters could occur more frequently in the future as rising global temperatures accelerate the melting and destabilization of snow and ice in the Himalayas. Scientists have said that a massive landslide blocked a glacial river, creating a natural dam that later burst and triggered the devastating flood.
Experts are still studying the role climate change played in the disaster. However, rising temperatures are making Nepal’s glaciers and permanently frozen, steep Himalayan terrain increasingly unstable. Nepal contributes only 0.1 percent of global carbon emissions. Yet the country, despite producing such a small share of emissions, is increasingly being forced to bear the consequences of carbon emissions generated by wealthier countries. Nepal has been calling for compensation, arguing that those countries bear responsibility for the climate crisis.
Nepal has already sought US$20 million in compensation from a United Nations fund established to support developing countries suffering losses and damage caused by climate-related disasters. In an interview with Nepali media, Foreign Minister Shishir Khanal said Nepal’s contribution to global carbon emissions was extremely small, while the country was bearing a disproportionately large share of the consequences created by those emissions.
“In this context, Nepal must stand firmly and make this an issue of international justice,” he said.
Although the physical damage from the Rasuwa floods has been concentrated in several districts of central Nepal, uncertainty surrounding the reconstruction of the economic corridors made increasingly vulnerable by climate change could affect the country’s economic growth for years. A World Bank analysis has projected that if global temperatures continue to rise at the current rate, Nepal could lose around 4 percent of its gross domestic product by 2050.
Nepal’s role in creating the problem of carbon emissions and the resulting climate crisis is extremely limited. Yet there is growing sentiment among Nepalis that the country is now paying the price for an extreme climate crisis it did little to create, said Sonia Rijal, a postdoctoral research fellow at the University of Sydney. She warned that floods of this nature could occur again. Building new infrastructure in expanding high-risk areas will increase the cost of disaster resilience, financing and insurance, making reconstruction efforts more complicated.
“This reconstruction needs to be fast and cost-effective, but it is too late to build resilience,” Rijal said. “Under normal circumstances, trying to build all of this would already be extremely difficult. It becomes even more difficult when we are facing one disaster after another.”
Sudeep Bhaju, director of the Nepal Economic Forum and an official at an economic policy think tank, said construction costs are likely to rise in the future as infrastructure standards are tightened following the floods.
He said rebuilding infrastructure to withstand increasing climate-related risks could cost up to twice as much as the original cost of the destroyed structures. Some projects, including hydropower dams, could be permanently shut down, undermining Nepal’s ambition to diversify its economy by exporting electricity to neighboring countries such as India and Bangladesh.
“We are waiting for the next time bomb, aren’t we?” he said. “So the biggest question now is how we are going to rebuild.”
The sudden floods, which killed hundreds of people, are already affecting not only the areas directly hit by the disaster but also Kathmandu, hundreds of miles away. According to Bhaju, prices of everyday consumer goods, including fruits and vegetables, have increased by 5 to 8 percent. A section of the Prithvi Highway at Parewibhir, a vital lifeline connecting Kathmandu with other parts of the country, collapsed because of the floods, disrupting the supply of goods, including cooking gas, to the capital. Although gas is being transported through alternative routes, supply shortages have pushed the unofficial price of a cylinder up by as much as 36 percent outside the formal distribution system.
“If the government fails to ensure adequate supplies of gas to hotels and restaurants, it will inevitably create a form of black market,” he said. He warned that the consequences could spread across the transportation sector and the prices of everyday consumer goods.
Nepal’s businesses had not yet fully recovered from the damage caused by the 2015 earthquake, economic blockades, the COVID-19 pandemic, the Gen-Z movement and other natural disasters. The Rasuwa floods now threaten to deepen the pain caused by previous disasters and economic shocks.
The devastating earthquake of 2015 killed around 9,000 people and caused approximately US$10 billion in damage. It also led to the closure of a major border crossing with China. Subsequently, much of Nepal’s trade activity shifted northward to Rasuwagadhi, one of the areas worst affected by the latest floods. The destruction last month also wiped out the Rasuwagadhi border crossing. The Bhotekoshi River had flooded in late June the previous year as well. In just over a year, the border point has therefore been hit twice by floods associated with climate-related risks.
The destruction of the Rasuwagadhi border crossing has further intensified problems for traders and businesses. Saloni Sethia, managing director of Vay Tech, a Kathmandu-based specialist building-systems and construction-materials supply company, said her business was affected by both floods. With trade routes connecting Nepal and China now effectively disrupted, she said transportation costs through the Korala border crossing have increased by as much as four times. The uncertainty over when goods will arrive is also adding to costs, she said. Shipping goods by sea from China’s Guangzhou port takes another three weeks.
“That uncertainty itself is another cost. Someone has to pay for those additional three weeks. Normally, that cost either comes out of the importer’s profit or is passed on to the customer through higher prices. Sometimes both have to bear the burden,” she said.
Many businesses are expecting their debt levels to rise, payments to be delayed and cash-flow pressures to intensify. Vay Tech is a supplier to several hydropower projects whose dams were swept away by the Rasuwa floods. Sethia said the company has no clear idea when it will receive payments owed to it after the projects were destroyed.
The floods have disrupted trade and transport just weeks before Dashain and Tihar, Nepal’s major Hindu festivals, after destroying a key border crossing and large sections of the roads connecting it with the rest of the country. The disruption has raised concerns that shortages of goods could intensify during Dashain. Last year, economic activity was affected during the Dashain public holiday because of the Gen-Z movement. Businesses had been borrowing money and importing goods in the hope of recovering those losses this year. But the floods swept away much of the merchandise they had ordered before it could reach the market.
Tourism contributes nearly 7 percent of Nepal’s GDP and provides employment to more than one million people. Several foreign tourists are also among those killed or reported missing in the Rasuwa floods. Analysts warn that the disaster could reduce the number of foreign visitors to Nepal, with the tourism industry likely to bear the economic consequences. According to the Nepal Economic Forum, foreign tourist arrivals fell by 26 percent following the 2015 earthquake and by 18 percent after the 2025 Gen-Z protests.
“This is how an event affecting a single economic corridor becomes a national event,” Sethia said. “Even businesses that were nowhere near the floodwaters end up bearing part of the losses, and there is no specific provision for this in any reconstruction estimate.”
