Rich nations are handing Nepal a climate crisis bill it can’t afford

By Stephanie Yang, CNN

(CNN) — Work to rebuild trade routes destroyed by catastrophic flooding in Nepal has begun, with a new bridge across the Tadi River that the Nepali Army is calling the “bridge of hope.”

Nepal will need a lot of it, as the country starts digging itself out of a disaster-related economic crisis that government officials estimate will cost a least $5 billion in reconstruction receipts alone.

What the headline number doesn’t account for, experts said, is the knock-on impacts from losing critical infrastructure the country depends on for travel and transporting goods.

“This flash flood, it is not a single-sector disaster,” Nischal Dhungel, a non-resident fellow at the Nepal Institute for Policy Research who writes about Nepal’s economy.

“Its effects run through farms, power plants, trade corridors, tourism, business, insurance, linking household losses to national economy recovery.”

Several major nations have already pledged humanitarian and financial assistance to Nepal, including the US, China and India.

But part of Nepal’s plea for more global aid stems from concerns that extreme flooding will become more common as climbing temperatures melt ice caps in the Himalayas. Scientists believe the recent event was caused by a huge glacial collapse that triggered a landslide.

Experts are still working out what role climate change played in the disaster, but rising temperatures are destabilizing Nepal’s glaciers and frozen mountain slopes.

Nepal’s leaders have made it clear they’re assigning some of the blame for the disaster – and the responsibility to pay for it – on larger countries that generate far more than Nepal’s 0.1% share of global emissions.

And they’ve already requested $20 million in compensation from a United Nations fund made to assist developing countries hit by climate-related losses.

“Nepal’s contribution is extremely low, yet we are among those bearing the consequences of the problems created by those emissions,” Foreign Minister Shisir Khanal said in an interview with Nepali media.

“In this regard, Nepal must stand firm and make this an issue of justice at the international level.”

Nepal is ‘paying the price’

While the damage is concentrated within a few valley districts in central Nepal, the uncertainty around reconstructing those economic corridors, exacerbated by climate change, could drag on the country’s growth for years.

If global warming continues at pace, Nepal could lose roughly 4% of its GDP by 2050, according to World Bank analysis.

“There is now a strong narrative among Nepalese that the country is paying the price of a climate crisis it did very little to create,” said Soniya Rijal, a postdoctoral research fellow at the University of Sydney who studies community responses to extreme events.

The possibility of subsequent floods also complicates reconstruction efforts, by raising the costs of disaster resilience, financing and insurance for new infrastructure in the widening danger zone.

“This rebuilding carries paradoxical pressures between being fast and cost-effective, and being slow enough to build resilience,” Rijal said. “It’s so difficult even in the normal situation when you try to build all these things. As we are facing cascading disasters, it becomes even harder.”

Sudip Bhaju, a director with the Nepal Economic Forum, an economic policy think tank, said heightened standards for infrastructure following the floods will likely make future construction more expensive.

The growing risks of climate change could double the cost of rebuilding compared to what was lost, he said. And some projects like hydro dams may be permanently shelved, hindering Nepal’s ambitions to diversify its economy by exporting energy to neighbors like India and Bangladesh.

“We are waiting for another time bomb, right?” he said. “So, the biggest question here is, how are we going to build?”

Incalculable losses

Miles from the path of Nepal’s deadly flash flooding, Bhaju is already starting to see its economic reverberations in the nation’s capital of Kathmandu.

Everyday essentials including fruits and vegetables have gotten 5-8% more expensive, according to Bhaju. The price of gas has risen as much as 36% outside official distribution channels, when consumers can get it, he said.

“If the government is not ensuring proper supply of gas to hotels, restaurants, then that’s definitely going to create a kind of a black market,” he said. “That is going to have a ripple effect on everything from transport to your daily goods.”

For many businesses in Nepal, the floods threaten to compound lingering pain from previous disasters and economic shocks.

After an earthquake in 2015 that killed 9,000 people and caused $10 billion in damage shuttered a major border crossing with China, much of the country’s trading activity moved north to Rasuwaghadi, one of the hardest-hit area of the recent floods.

But last month’s destruction marked the second time in less than two years that Rasuwaghadi was struck by climate-driven flooding.

Saloni Sethia, managing director at Vie Tec, a specialist building systems and construction supply company based in Kathmandu, said that her business was hit by both floods. With trade channels to China now constrained, she said it’s costing four times as much to hire drivers to deliver goods via the Korala border pass, with wait times undetermined, but growing. Switching to sea freight from the port city of Guangzhou adds three weeks to delivery.

“That uncertainty is a cost in itself,” Sethia wrote in an email to CNN. “Somebody pays for those extra three weeks. Either the importer’s margin or the customer’s price, usually both.”

She said many businesses are also anticipating loan losses, delayed payments and squeezes on cash flow. As a supplier to some of the impacted hydro dams, Vie Tec has no realistic way to forecast when it might be paid.

The halt to trade and logistics also comes a few weeks before Dashain, a 15-day Hindu religious festival that significantly drives consumer spending and tourism annually.

Last year, economic activity from the holiday was dampened by large-scale student protests, Sethia said, and businesses that had hoped to recoup those losses this year bought goods on loan that were ultimately lost to the floods.

Foreign visitors could be discouraged from visiting Nepal as well, impacting an industry that accounts for about 7% of the country’s GDP and more than one million jobs. Past shocks such as the 2015 earthquake and the 2025 Gen Z protests were followed by a 26% and 18% drop in foreign arrivals respectively, according to the Nepal Economic Forum.

“That is how a corridor event becomes a national one,” Sethia wrote. “Businesses that were never near the water end up carrying part of the loss, and there is no line for that in any reconstruction estimate.”

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