Generally speaking, embezzling has the detrimental effect of diverting resources from their proper purpose - which is, for the most part, to improve the Nepalese people's living standards, in particular that of disadvantaged populations. When corruption takes the shape of tax avoidance, it brings about loss of tax revenue, whereas this public money should be spent on public services and infrastructure. Therefore, corruption adversely affects these areas : the public transport system and roads are in poor state, since the available funds are insufficient to maintain them. They are also insufficient to pay public officials an adequate wage for them to support themselves and their families. Consequently, a vicious circle sets in : public officials are obliged to abuse their positions of power to dishonestly obtain money for survival purposes. In this way, corruption breeds corruption.
Another field in which corruption diverts funds from their intended or best use is foreign aid. Aid from foreign countries are often given without too much thinking about the wellbeing of the recipient countries. When aid money is given carelessly, disreputable organizations often do not spend it in the purpose it was intended to be used for - to help the disadvantaged. Instead it is selfishly taken and frivolously spent; therefore, the 'rich get richer, and the poor poorer'.
A corrupt country (such as Nepal) will receive less national and foreign investment. This is because potential business investors will be discouraged from investing money and resources in the countries' economic infrastructures due to a fear of being cheated. As a result, these countries' economic growth stagnates. What is more, some foreign aid donors have scaled back their assistance to countries deemed to be corrupt and where governance is judged to be especially poor (Mauro, 1997).
Corruption can also be held responsible for political and social instability, most notably "the rise in warlords and tyrants" (Panday, 2001, p.2) which in Nepal appears in the form of some fringe parties' criminal activities. With lesser intensities of corruption, inequality of opportunity and schism between the rich and the poor, such violent political movements would be far less likely to form.
Mauro cites another potential consequence of corruption: "Where rent seeking proves more lucrative than productive work, talent will be misallocated. Financial incentives may lure the more talented and better educated to engage in rent seeking rather than in productive work, with adverse consequences for the country's growth rate." (Mauro, 1997).