This paper evaluates Nepal’s challenges related to resource mobilization for sustainable graduation in the aftermath of COVID-19 and potential avenues to overcome them. Nepal’s graduation is scheduled to become effective in 2026, and the country also aims to become an upper middle-income country by 2030. With the lowest per capita income among graduating LDCs, the continued developmental challenges faced by Nepal include premature de-industrialization, low productive capacity and low rate of job creation. While the country already faces substantial gaps in development financing, resource mobilization for implementing transitional strategies is being challenged by additional resource demands in the aftermath of the COVID-19 crisis.
Against this backdrop, the paper examines the structure of development finance landscape of Nepal, projected investment needs and resource gaps faced by the country in the current context. Domestic fiscal space is assessed in detail, considering the potential for improving both revenue and expenditure sides of public finance. The paper calls for a reassessment of additional investment needs and gaps in the post-COVID-19 context, and proposes ways to revitalize domestic financing and to capitalize on potentials for tapping external sources such as foreign aid, FDI and remittances.