Nepal's fragile economy is coming under pressure as the tourist industry suffers losses and several donor countries withhold financial aid because of the government's crackdown on opposition.
The Nepal Tourist Board says the number of visitors to the country dropped by as much as 43 percent in February.
The decline followed a state of emergency imposed by King Gyanendra on February 1, and a crack-down on all opposition. The move has fueled security concerns about a country where a violent communist rebellion has been raging for nine years.
The spokesman for the Tourist Board, Aditya Baral says visitors from countries such as India, United States, Japan, France, and Germany are staying away.
"The travel advisories issued by the different foreign countries, basically from the major tourist-generating countries of Nepal that has hampered us a lot and basically the [news] coverage, which is not based on reality has also hampered us a lot," he said.
The drop in tourism has led to fears that fewer trekkers will arrive this summer to climb the rugged mountain peaks in the Himalayan range - a huge source of revenue for the country.
The trekkers are a lifeline for about 75,000 mountain guides and porters, who work for a few months every year in the climbing season to sustain their households.
At least one planned expedition to Mount Everest has been canceled - an Indian army team of women climbers says it will attempt the climb to the peak from the Tibetan side instead of via Nepal.
Tourism contributes as much as three percent to Nepal's gross domestic product.
In addition, shrinking foreign aid following the takeover by the king has left Nepal facing a crisis.
Foreign donors contribute more than two-thirds of the funds for development activity in the country. But several countries, such as Denmark, Switzerland and Norway, have halted aid to the country, and are asking it to restore democracy. The World Bank has also suspended a $70 million aid package to Nepal.
Regional economic analyst T.K. Bhaumik in New Delhi says the freeze in funding will halt projects such as building roads, schools and hospitals. He calls it a huge blow for the aid-dependent country,
"It [Nepal] is passing through one of the worst phase, where economic development is being thoroughly neglected and the government is not able to concentrate or pursue many of the development measures they may have initiated," he said.
The World Bank says poverty has intensified in the past two decades in the country where per-capita income is $230 a year.