Nepal seeks to align foreign policy with economic interests: Foreign minister

Nepal’s Foreign Minister Shisir Khanal has outlined an ambitious economic diplomacy strategy aimed at aligning the country’s foreign policy with its economic interests and building a $100 billion economy within the next decade.

Speaking at the Fourth AIDIA Distinguished Lecture Series on “Economic Diplomacy for Prosperous Nepal,” Khanal said Nepal must move beyond traditional diplomatic practices and use its foreign policy to drive economic transformation, investment and trade, according to Nepal's foreign ministry. 

He said Nepal’s geographic position between India and China should be treated as a strategic asset rather than a constraint. The government, he said, is pursuing greater regional connectivity through cross-border railways, multimodal transport corridors, improved roads and stronger integration with regional supply chains.

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Khanal also highlighted hydropower, technology, tourism and the Nepali diaspora as key drivers of future growth. He said Nepal aims to expand hydropower capacity to 28,500 megawatts by 2035 and increase electricity exports while attracting energy-intensive, low-carbon industries.

On the technology sector, the minister said Nepal’s IT service exports have recently approached $1 billion and announced government initiatives including the country’s first sovereign artificial intelligence compute centre and tax incentives for IT service exports.

Khanal also called for greater mobilisation of diaspora capital and expertise, saying Nepal should move from seeking aid and concessional financing toward attracting commercial investment and strategic co-investment.

Addressing climate vulnerability, he said climate change must become a central element of Nepal’s foreign policy. He called for greater access to grant-based loss-and-damage financing, debt-for-climate swaps and international carbon markets.

Khanal said the government’s broader vision is to transform Nepal into a connected, innovation-driven and prosperous economy by combining economic reforms, private-sector investment, international connectivity and the country’s cultural and natural assets.