Kathmandu, Mar. 10
The economy of Nepal is at the juncture of being
pushed into crisis and if appropriate measures are not taken to promote doing
business climate and create jobs, it may fail to catch the upward trend as
claimed by the government and the central bank.
Speaking at the inaugural ceremony of the Second
National Economists' Conference 2023 organised by the National Economic Concern
Society (NECS) in Kathmandu on Friday, private sector, economists, political
leaders and the central bank exhibited divided opinions about the current
status of the national economy.
While all of them expressed serious concerns over the
troubles the business community and common people are facing because of the
economic slowdown caused by the high inflation and supply chain problems due to
the disturbance caused by the COVID-19 pandemic and further damages by the
Russian invasion of Ukraine, and shortage of raw materials, liquidity crisis
and measures taken to balance the external sector pressure, economists
concluded that the economy was pushed on the rugged path because of the
mismanagement by the political leadership. But private sector blamed the wrong
policies of the government and central bank while the Nepal Rastra Bank (NRB)
said that the economy was on the path of recovery.
Governor of the NRB Maha Prasad Adhikari maintained
that the economy was in comfortable situation as the foreign exchange reserves
are above US$ 10 billion and the balance of payment is Rs. 100 billion surplus
by the end of the first half of the current fiscal year 2022/23– it was in loss
at the same period last year.
"There is sufficient liquidity in banking system.
The Credit Deposit (CD) ratio has come down to 86 per cent now against about 96
per cent corresponding period last year," he said. It means the banks and
financial institutions (BFIs) have more money to mobilise loans and finance
trade.
Adhikari said that although inflation rate is above
the earlier estimates, the situation has not been that worse compared to many
countries around the world. He gave an example of Argentina, a South American
country, which has 99.9 per cent inflation rate in 2023.
According to him, capital is being channelised to
unproductive sector. In the phase-wise manner, the central bank has been making
efforts to mobilise loans in agriculture, small and medium enterprises and
energy sector in order to create an environment for sustainable development.
Governor Adhikari suggested that the long-term
projects should opt for the fixed interest rate in the loans they obtain from
the BFIs.
However, Lawmaker and former Health Minister Gagan
Kumar Thapa said that the economy is at a juncture of being pushed into crisis.
"I have not seen so many people worrying about the economic well-being of
the country, business and households before," he said.
He stressed on the structural reforms to lead the
economy on the path of growth. "There is a structural problem in our
economy, but we have long been showing indifference to it. Youth migration, too
much reliance on remittance and import boosted by it, and lack of productivity
are the issues that need to be addressed in the first phase," he said
while maintaining that creating jobs in the country could be a solution.
"If we believe that the economy is sick, we need
to find a solution. Whose job is this?" Thapa asked the economists and
pointed to the need for the orientation of politicians - from ward member to
the prime minister – in order to create an impetus for development and economic
growth.
According to Thapa, who is also the General Secretary
of the Nepali Congress Party, the government and economists should look into
the depth of the issues rather than making superficial comments. For example,
the rhetoric about the food imports is misleading since Nepal is the rapidly
urbanising country which means food consumption is diversified and nutrition
intake is being increased. "It will surely increase demand for food,"
he said.
Thapa also said that smuggling of goods should be
checked to promote domestic industry and create jobs. But Home Administration
is so corrupt that it doesn't show any interest to check it, he maintained.
Dr. Bijaya Poudel, Leader of CPN (Unified Socialists),
said that when farmers, business persons and common people do not feel the
benefits of economic growth, positive indicators won't encourage them.
"The budgetary system should be overhauled.
Modality of programme implementation should be reformed and every project that
doesn't support in employment creation should be scrapped," he said.
Dr. Poudel suggested that the Foreign Direct
Investment (FDI) should be facilitated with just one page declaration of the
validity of the capital being brought into the country.
Prof. Dr. Shiva Raj Adhikari, Head of the Central
Department of Economics at Tribhuvan University, said that the country needs to
address two major problems - brokering system and rent-seeking culture - in
order to ignite the potential for economic growth.
According to him, the three pillars of the economy -
government, private sector and cooperatives - are facing structural and
functional challenges since long. It is holding us back from making significant
economic strides. "Yet, fundamental challenge is the poor implementation
of policies and programmes," he said.
Economist Dr. Jivan Amgain and Baikuntha Pandey, said
that the proliferation of informal economy has negatively impacted the revenue
collection and suggested to simplify the business registration, tax process and
offer incentives to formalise the businesses.
Published in The Rising Nepal daily on 11 March 2023.
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