Experts stress response to revive ailing economy

Kathmandu, Feb. 23

Economists have said that lack of appropriate response to the emerging economic challenges like low capital expenditure, dwindling remittances, liquidity crisis and declining foreign exchange reserves has confused the investors.

Speaking at an interaction programme on ‘Economic stability and new-revival’ organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) on Wednesday, they said that many policies that the government announced to attract investment and remittances through formal channel have not yielded desired results.

The worsening economic situation created by the COVID-19 pandemic has lowered the confidence of the investors, they said and called for continuation of the facilities announced during the pandemic.

“The feedback ecosystem to bridge the gap of policy and stakeholders is poor and it has not received priority,” said Professor of Economics Dr. Achyut Wagle.

He expressed worries over the increasing cost of capital. He suggested shutting down the microfinance institutions saying that the cost of capital has reached as high as 35 per cent as the MFIs have become ‘the intermediaries of the intermediaries’.

Commercial banks have reached all the local units and finance companies are there to cover the remaining sectors of investment. Microfinance companies are redundant, he said.

He suggested to promote small sectors of manufacturing that have backward linkages. Nepal has become almost self-reliant on shoes but almost all raw materials are imported, there is no use of promoting such sectors, Dr. Wagle said.

Banker Parshuram Kunwar Kshetri projected that the country might witness about 1700 billion trade deficit in the current fiscal year 2021/22. “And some people want to reject the Millennium Challenge Corporation grant at such a scenario,” he said.

He added that Nepal’s export growth is not sustainable as it is based on duty arbitrage.

Chief Executive Officer of the Global IME Bank Limited, Ratna Raj Bajracharya said that the interest rate of the deposits might cross 12 per cent in a month from now.

Economist Dr. Govinda Nepal said that Nepal should not fail to emulate the proven and successful development models from other countries.

“There is no environment for foreign borrowing during the pandemic and without country rating, foreign investors hesitate to come and invest here,” he said. He blamed politicization for lack of competencies of businesses and other professional sectors.

Economist and Trade Expert, Dr. Posh Raj Pandey said that the increasing interest rate would create risks for the businesses. He added that lack of accountability has exacerbated crisis in the economy.  

President of Nepal Remitters Association, Suman Pokharel said that since the job destination markers are opening up, remittance inflow would increase in a few months.

Senior Vice President of the FNCCI, Chandra Prasad Dhakal recommended to provide consular services to the migrant workers who send remittance through formal channel at the discounted rate and offer incentives to promote sending money back to Nepal via formal channel.

President of the FNCCI, Shekhar Golchha said that the private sector is reeling under the liquidity crisis and struggling to manage resources for investment. 

Published in The Rising Nepal daily on 23 February 2022.