We Will Deal with it Later: Nepal’s Ageing Population and the Economy it Will Reshape

As remittances sustain the present, a demographic transition is quietly building, and Nepal's state architecture may not be ready.

There is a phrase we Nepalis have grown comfortable with: ‘We will deal with it later’. Naturally, later has arrived.  

Nepal is on the cusp of a demographic transformation that is set to fundamentally alter its economy, its social contract and more importantly the state’s very structure. While the newly elected government has rightly put its focus on green and digital transitions, a third and arguably more disruptive shift is slowly underway: Nepal’s demographic transition. Unlike floods or earthquakes, this predicament does not arrive with sudden urgency. It accumulates quietly, year by year, in maternity wards, emigration queues and pension ledgers, until one day, the numbers no longer add up.

Since 1991, the elderly population in Nepal has nearly tripled, and the population pyramid indicates a forecasted shift from a youth-dominant structure to one increasingly composed of older individuals. A transition in effect mainly due to declining birth rates and increased youth migration abroad.   

The data is unambiguous. Nepal’s population of 29.6 million is ageing. As per the 2021 National Census, the above 60 age cluster grew from 8.1% in 2011 to 10.2% in 2021. Furthermore, as per the Population Division at the National Statistics Office, by 2028, Nepal will reach ‘ageing society’ status, as defined by the United Nations and by 2054 BS, it will be an ‘aged society’. Simultaneously, the total fertility rate decreased from five births per woman three decades ago to 2.1 today, on par with the replacement threshold.  

These are not projections in the distant future but the reality that Nepal is already approaching.   

Nepal’s Remittance Architecture 

As remittance from the estimated 3.5 to 4.4 million Nepali citizens working abroad account for nearly a quarter of the national GDP, a dependency that the previous governments have tolerated rather than resolved, Nepal’s economy rests on a precarious foundation. Despite a nominally favourable Balance of Payments situation, Nepal is still weak in terms of foreign trade. 

In the previous fiscal year, imports were worth Rs 6.57 for every one rupee exported. Our current situation reflects emigration not as an opportunity but a necessity. Our domestic workforce stands at 8.43 million, representing only 39.75% of the population, with unemployment at 10.71%. According to data provided by the Department of Foreign Employment, a total of 839,266 Nepalis received labour permits for foreign employment in Fiscal Year 2081/82 BS.  

This is the paradox at the crux of our demographic situation: a country simultaneously exporting its working-age population and watching its elderly population grow. While the support ratio of the number of working-age individuals supporting each elderly dependent, currently stands at 9.9 workers per elderly person; that figure 
will contract sharply in the coming years.   

The question that looms over Nepali policymakers is this: as migrant workers also age and return, and cash flow of remittances plateau or decline, as they inevitably will, and as destination economies automate and tighten immigration – what replaces them? Nepal has no significant industrial base. Its manufacturing sector is nascent. Its services sector remains concentrated in tourism and trade. Inevitably, the cushion that remittance has long provided, absorbing economic shocks for decades, will lose its effect.   

Promises of a Socialist State 

As a constitutional socialist republic, although Nepal’s commitments to its elderly citizens are legally enshrined and morally sound, they are fiscally fragile. Under the current social security allowance scheme, all individuals aged 70 and above receive Rs 4,000 per month in old-age allowance, known colloquially as the Briddha Bhatta. A lower age threshold of 68 applies to Dalits, single women and persons with disabilities, among others. As of 2025, 1,857,529 elderly individuals receive the state-implemented old age allowance.  

As the elderly population grows, a cohort that rose by 36.7% between the 2011 and 2021 censuses alone, the pressure upon the state’s finances will compound rapidly. The legal architecture that governs retirement further tightens the timeline: under recent amendments to Nepal’s labour law, the mandatory retirement age is set at 60, while life expectancy has risen to 71.3 years. This creates an 11-year gap, during which the state bears primary financial responsibility for a growing cohort of citizens.  

Legal Framework   

Article 34 of the Constitution of Nepal guarantees the right to employment, and Article 43 enshrines the right to social security. These are not aspirational provisions; they carry the force of enforceable rights. The challenge is that the legal framework surrounding these rights was designed for a demographic reality that no longer exists.  

Whilst Nepal’s Labour Act 2017 and the Contribution-Based Social Security Act 2017 have been landmark pieces of legislation, creating a contributory pension framework for formal sector workers, the formal sector employs only a minority of Nepal’s workforce. The vast majority, comprising informal workers, subsistence farmers and returned migrants, participate only on a voluntary basis, with negligible uptake. As the aged population grows and the formal sector remains underdeveloped, the pressure on the socialist system will become legally and fiscally unsustainable.  

There is an urgent need for legislative reform. The retirement age framework requires reconsideration. A mandatory retirement age of 60 in a country with a life expectancy of 71.3 years and a shrinking workforce is a demographic and economic liability. Singapore, an age-old aspirant for Nepali politicians is a useful comparator, with its deliberate policy choice to raise its retirement age to 64 by July 2026, recognising what economists call the ‘silver dividend’ or the ‘longevity dividend’: a quantifiable economic benefit of keeping experienced, productive older workers in the labour market longer. Nepal’s legal framework too should incentivise, rather than foreclose, extended labour market participation.  

To its credit, the government is not standing entirely still. In its first 50 days, the newly elected government announced the 100-point agenda and under it, the National Commitment Plan was also unveiled, highlighting economic stability and reform as the core objective, with an ambitious goal to achieve an average economic growth rate of 7% within the next five years, per capita income of $3,000, create 1.5 million jobs domestically and most importantly create a $100-billion economy.  

The national budget for FY 2083/84 BS, presented by Finance Minister Dr Swarnim Wagle to Parliament centres on digital transformation, structural economic reform and employment-oriented growth. The budget reflects Dr Wagle’s stated ambition to shift Nepal toward a sustainable economy. On social security, the budget has allocated Rs 120 billion and proposed a national campaign, “Those who can, give it up; those who cannot, stay covered”, encouraging economically capable citizens to voluntarily forgo their allowances so that freed resources reach those most in need. These are steps in the right direction. However, the risk is familiar: good policy framed in a budget speech dissolves in implementation. What Nepal requires is not another well-intentioned budget but legislation that endures beyond electoral cycles and the institutional capacity to enforce it. 

A Window that is Closing 

The United Nations Decade of Healthy Ageing (2021–2030) frames demographic transition not as a burden to be managed but as an opportunity to be seized. Nepal has, today, a support ratio of 9.9 workers per elderly dependent, a ratio that still allows for meaningful investment and structural reform before the demographic balance tilts. A period of grace during which a relatively large working-age population can generate the surpluses necessary to build the infrastructure for an ageing future.  

Our neighbours in the north offer lessons, albeit cautionary ones, and our neighbours in the south are currently grappling with a similar transition. Every year without reform is a year of compounding liability, in pension costs, lost productivity and skills, healthcare demand, and eroded state capacity. While green and digital transitions are real and important with global trends, demographic transition as well, is not an issue to be sidelined for later.