Nepal slips one position in economic freedom; stands 90th out of 165 countries

KATHMANDU, Oct 7: Nepal has slipped one position in the global ranking for economic freedom, with the country being ranked 90th out of 165 countries.

The 2026 Annual Report of the Economic Freedom of the World shows that Nepal scored 6.59 out of 10 this year, which was 0.01 point up from 6.58 of the last year. Although there was a slight improvement in Nepal's score, its ranking dropped from 89th to 90th place due to the comparative performance of other countries worldwide.

The report measures economic freedom based on the extent to which individuals are free to make decisions regarding their economic activities. It covers five key areas--the size of government, legal systems and property rights, stable currency, freedom of international trade, and regulation. A total of 46 indicators and sub-indicators have been assessed across these five areas.

Sector-wise assessment reveals that Nepal's weakest area lies in its legal system and property rights. In this category, Nepal scored 4.82 out of 10, ranking 96th among 165 countries.

This area measures the extent to which the legal system protects individuals' economic rights and property—key components of economic freedom. It encompasses factors such as judicial independence, impartial courts, property rights, the integrity of the legal system, contract enforcement, protection of real property, and issues related to policing and crime.

Another area where Nepal performs relatively poorly is the freedom of international trade. Nepal scored 6.39 in this category, ranking 117th. This area covers aspects such as tariffs, non-tariff trade barriers, import-export costs, foreign exchange markets, and controls on the movement of capital and people.

According to the report, achieving a high score in international trade requires low and uniform tariffs, streamlined customs clearance processes, efficient customs administration, a freely convertible currency, and minimal restrictions on the movement of physical and human capital.

In contrast, Nepal stands relatively better in the regulatory sphere. The country scored 6.90 in the regulatory category, ranking 50th. This area evaluates credit markets, labor markets, business regulations, and the freedom of competition. Business regulations encompass aspects such as regulatory burdens, bureaucratic costs, the impartiality of public administration, and tax compliance. Similarly, the labor market category utilizes indicators such as labor regulations, minimum wage, hiring and firing procedures, wage determination, working hours, and regulations regarding foreign labor.

In the area of government size, Nepal scored 7.25 points and ranked 51st. This category evaluates the impact of factors such as government consumption, government investment, subsidies and transfers, top marginal tax rates, and state ownership of assets.

The report defines the government size category as a measure of how government spending and tax rates affect economic freedom. Countries that maintain lower levels of government consumption, interest payments, transfers and subsidies, and government investment—along with lower marginal tax rates and reduced state ownership of assets—achieve higher scores in this category.

Nepal’s standing appears even stronger in the area of monetary stability. In the ‘Sound Money’ category, Nepal scored 7.57 points and ranked 101st. This category evaluates factors such as money supply growth, inflation volatility, the previous year's inflation rate, and the ability to hold foreign currency bank accounts.

According to the report, this category measures the extent to which monetary policy grants individuals the freedom to make economic decisions. Since high and volatile inflation—or deflation—impacts personal economic decisions, a stable currency and minimal restrictions on the use of alternative currencies are considered crucial for economic freedom.

Globally, Hong Kong holds the top spot with a score of 8.53 marks. It is followed by Switzerland (8.45), Singapore (8.43), New Zealand (8.38), and the United States (8.21).