IMAGE: REUTERS
NEPAL IS a young country. Nearly half its population—some 47.5%—is under the age of 25. Its working-age population, the group between 15 and 64 who should be driving economic output, makes up about 65% of all Nepalis. In the language of development economics, this is called a demographic dividend: a moment, typically lasting a generation, when a country has more workers than dependants and the potential for rapid growth is at its highest. Rich countries, which are ageing fast, would pay dearly for Nepal’s age structure. Nepal’s ability to benefit from it depends almost entirely on one question: can it create enough jobs, schools and hospitals to keep its young people at home and productive.
The answer, so far, is no. In the first nine months of the current fiscal year, 587,340 Nepalis obtained labour permits for foreign employment: an average of roughly 2,075 departures a day, according to data from the Department of Foreign Employment released in May. That figure has barely changed under the new government. The Ministry of Labour’s own spokesperson, Pitambar Ghimire, acknowledged the obvious: the trend is “largely driven by limited prospects at home”. On top of those heading for manual work in the Gulf and Malaysia, some 100,000 Nepali students leave a year to study abroad, most of them in India, Australia and the United States. Many do not come back.
The economic logic is plain. Nepal’s youth unemployment rate—the share of 15-to-24-year-olds actively looking for work but unable to find it—stands at 20.6$, according to the latest World Bank modelled estimate for 2025. The overall unemployment rate, from Nepal’s own living standards survey, was 12.6% in 2022-23, up from 11.4% five years earlier: a system moving in the wrong direction.
In a country where the formal private sector is thin, public sector hiring is politically rationed and agriculture is shrinking as a share of the economy, the only reliable employer for a young Nepali with energy and ambition is a construction site in Qatar or a factory floor in Malaysia. The remittances they send home—$11.55bn in the nine months to mid-April, a 32% bump—are proof that this system works for individual families. They are also proof that it is not working for the country.
Education is the first place the system fails. Nepal has made commendable progress in getting children into school: the gross secondary enrolment ratio reached roughly 90% by 2024 (though the net enrolment rate—children actually attending full-time—is significantly lower, some 46%). But enrolment and learning are different things. Tribhuvan University, which is where most of Nepal’s university students study, has for decades been more reliably a source of political clientelism—its students’ unions run by the same parties that have run the country—than of market-relevant skills. The mismatch between what graduates know and what employers need is seen in a single paradox: Nepal’s IT industry, which employs around 100,000 people and is growing rapidly, says it cannot find enough qualified engineers in a country that produces more than 10,000 ICT graduates annually. The graduates exist; the skills do not.
Vocational training, which most economies treat as the essential bridge between school and work, is a thin offering. The Council for Technical Education and Vocational Training, which oversees Nepal’s system, operates well below the demand. Young Nepalis who do not make it to university and who do not qualify for the limited white-collar jobs in Kathmandu face a choice between subsistence farming and a labour permit. Most choose the labour permit.
Health shows a similar reality of system strain. As of the most recent data, Nepal has between 0.7 and 1.0 doctor per 1,000 people: a figure that has improved slightly in the last two years but remains inadequate. The World Health Organisation’s minimum recommendation for doctors, nurses and midwives combined is 2.3 per 1,000 people; Nepal’s total health workforce density is well below that.
Some 55% of all health spending in Nepal is paid out of pocket by patients, rather than covered by insurance or the state. That figure, which is high even by South Asian standards, means that a serious illness is still a financial catastrophe for most Nepali families. Total health spending per capita was around $88 in 2022, the most recent year for which comparable data are available: low, though the government has since increased its health budget. Some 70% of Nepal’s specialists work in Kathmandu, leaving the rest of the country—where most people live—functionally underserved.
None of this is a secret in Kathmandu. The government of prime minister Balendra Shah came to power on an explicit promise to create 1.2m formal jobs and bring the daily migration rate down. Its election manifesto promised universal health insurance and a reformed education system. The budget due on May 29th is expected to carry provisions for all of these, in varying degrees of ambition.
Finance minister Swarnim Wagle has cited jobs and domestic demand as the first test of the government’s economic strategy. The RSP’s wider vision—turning Nepal into a technology hub, attracting energy-intensive industries to absorb cheap hydropower, building a soft-power economy through high-value tourism—is premised on keeping more young people at home and productive rather than abroad and remitting.
The problem is that every Nepali government since the return of democracy in 1990 has promised some version of the same thing. The jobs did not materialise. The hospitals were not built in the villages that needed them. The schools got children through the door but not through the curriculum. Each time, the gap between the promise and the reality was plugged by migration and remittances: a system so efficient at generating household income that it reduced the political urgency of fixing the underlying economy.
What is different now, potentially, is that the generation demanding change has direct experience of what migration costs. The September 2025 protesters who drove the previous government from power were were young people who had watched their siblings board planes for Dubai and their parents borrow money for hospital bills. And they had concluded that something was wrong with a country that exports its people and imports its goods. Their protest, at the cost of 77 lives, produced the government that now holds the mandate to change that calculus.
Whether it does will show in numbers that are easy to track. How many labour permits are issued per day in 2027 compared to 2026. Whether the youth unemployment rate falls or rises. Whether health spending per capita moves. Whether new factories, data centres and processing plants open outside Kathmandu. Nepal’s youth bulge will last roughly another decade before the demographic window begins to close and the country starts to age. The dividend is real. So is the deadline. ■
