Economic problems will be addressed: FM Paudel

Kathmandu, Jan. 18

Deputy Prime Minister and Minister for Finance, Bishnu Prasad Paudel has said that he is still in the phase of diagnosing the troubles the Nepali economy is facing now.

“I am wondering what pushed the economy to the current crisis when all activities and macroeconomic indicators are in positive direction. I think, we need to find the answer to this puzzle first,” he said while speaking at an interaction on 'Economy: Way forward' organised by Nepal Chamber of Commerce (NCC) in the Capital on Wednesday.

“So, I am still in the phase of diagnosis. Treatment can't be initiated until and unless the reasons behind the economic maladies are identified,” said FM Paudel.

“Nepali economy has recently experienced multiple blows following the 2015 earthquake and economic blockade, we successfully managed those crises so I am confident that we will jointly combat with the recent challenges and move ahead,” he said.

According to the DPM, the government is always ready to listen to the suggestions and demands of the private sector and those demands would be addressed accordingly.

However, he said that, in the meantime, the government has tried to address some demands of the private sector although they were not enough. We need to do more in the days to come, I am with the private sector, he maintained.

DPM Paudel also said that there is also an urgent need to increase the revenue mobilistaion. Capital expenditure is pathetic which has affected multiple business sectors including construction and construction materials and manufacturing. We want to make some very significant structural reforms, he informed.

He was also of the view that the government should take the private sector as one of its collaborators not competitor.

According to the experts and Nepal Rastra Bank, Nepali economy is still facing multiple challenges like high inflation, growing trade deficit, liquidity crisis and high bank rate.

Although the banks and financial institutions have more than Rs. 250 billion liquidity, there is lack of demand for the loans from the private sector due to high interest rate which is still hovering at 15 per cent or so.

Dr. Yuba Raj Khatiwada, former Finance Minister and Vice-Chairman of the National Planning Commission (NPC), said that the focus should be towards increasing production, export and value addition.

“We need to enhance the capacity and efficiency of tourism and hospitality so that it could contribute more to the economy. Although the country welcomed 600,000 tourists, the income it made from them is nascent compared to other economies,” he said.

According to him, it will take a while to bring down the interest rates on loan to single digit.

Dr. Khatiwada said that the number of black-listed businessmen has increased three-fold in the first half of this fiscal year 2022/23 compared to last year. Some loans should be rescheduled in order to give an impetus to the businesses that could do well after that, he maintained.

“Sovereign rating of the country should be immediately concluded. The process was about to be concluded before the COVID-19 hit the country. This coupled with the establishment of hedging management agency could attract more foreign direct investment,” he said.

He also said that some leniency should be given to the housing as it will increase the market and sales of construction materials, thus increasing the local economy and supporting the manufacturing industry.

Dr. Swarnim Wagle, former Vice-Chairman of the NPC, said that the country is in a situation where even the recurrent expenditures couldn't be managed by the revenue collected by the government. “We are losing the international grants, share of loan is increasing. By the end of six months of the current Fiscal Year 2022/23, Nepal has received just Rs. 5 billion foreign grants,” he said.

According to him, the finance minister has an opportunity to implement reforms in various agencies under the Ministry of Finance. The size of bureaucracy should be immediately reduced as far as possible because most of the revenue is spent to manage those government employees including security personnel and health staff.

Dr. Wagle also suggested to gradually reduce the country’s dependency on remittance.

President of NCC, Rajendra Malla, said that businesses have been facing challenges due to lack of liquidity, high interest rates, poor capital expenditure, and poor revenue collection.

According to the latest statistics, there is a slight improvement in the external sector of the economy, but the internal sector has not yet been freed. The price increase of around 8.5 per cent is putting pressure on the economy due to pressure on liquidity, reduction in capital expenditure, and increase in interest rates, said Malla.

“There is no alternative to move the economy forward by increasing production, investment-friendly environment and business activities. In order to build a self-sufficient economy, it is necessary to move ahead with investment-friendly environment, agriculture, infrastructure development, information technology, tourism and water resources as the main priority,” he suggested. 

Published in The Rising Nepal daily on 19 January 2023.