Economic Crisis Is Real

Nepal’s import is rising because Nepal is spending almost all hard currency to import petroleum products. <br>Prof. BISHWAMBER PYAKURYAL

Sept. 24, 2010, 5:45 p.m. Published in Magazine Issue: Vol.4, No.-08 September 24-October 7, 2010
Nepal is in a serious economic crisis as the country is running without annual budget. Although there are certain progresses in GDP, this kind of fluctuation in GDP is common. However, Nepal’s economic indicators are in totality heading for a negative trend. This is an issue of serious concern. If we continue to put the country in the present situation, a major crisis is inevitable in the future. Economic statistics indicate how the situation is deteriorating further. If we talk about the trade, our export declined by 10 percent compared to the last year. During the last fiscal year, our export was about 67 billion rupees with increase of 14 percent than the previous year. Nepal’s total trade deficit has increased by 47 percent globally this year. This is a very serious implication for a country where the scenario of foreign direct investment is bleak and there is no environment for employment.

The increment in export is the only way to sustain the economy. Nepal’s export is declining but the import is increasing in alarmingly high rate. Thus, Nepal has been spending a huge amount of its hard currency to exchange the Indian currency used to import the goods. Because of this, the prices of our exported items are extremely high but our earning from export is low. Nepal’s foreign currency reserve is also not satisfactory. Now Nepal has 3.58 billion dollars foreign currency reserve. Compared to last year when it increased by 18 percent. There is a trend of declining of gross foreign exchange reserve.

Nepal’s import is rising because Nepal is spending almost all hard currency to import petroleum products. Since the price of oil increased in the international market compared to the last year, the increase is about 24 percent. This means we need to spend a huge amount of money to import oil. Since the prices of crude oil increased from 61 to 71 dollars, importing refined oil from India including the excessive duties will increase its cost. Because of this, the cost of production also increases.
There is huge imbalance in government’s income and expenditure as there are no restrictions at all in expenditure even at this period. Our recurrent expenditure, like in hospitality, travel allowances and  other increases. Similarly, the non-budgetary expenditure too increases. This is unrecorded in our economic terms. We have double digit inflation in the last one year though India’s inflation declined to zero.  Whoever may come to the government; the ruling side always defends their economic policy and plans as well as economic scenario during their tenure. This government is not exception. Of course, certain progress has been made in the last few months, like Balance of Payment is gradually improving following banning the gold import in the free market. Similarly, the imports of luxurious cars declined because of tightening of loans by banks.

As an economist, I have to reveal that Nepal’s economy is in a dire situation or it is on the verge of collapse. If this situation continues for a longer period of time, no body can rescue the economy. Due to lack of regular budgets all the development activities are at standstill and even there are no budgets in the hospitals and dispensaries where poor people cannot get medicines. Forget about other things, simply the government cannot provide subsidies in energy, water and fertilizers. Elderly people, widows and other people cannot get their monthly allowances provided by the government. This denial will affect the kitchen of such poor and deprived people. The big ongoing infrastructure work will also suffer. In some cases, the government will have to make heavy compensation. If the government cannot issue final payment, the cost will be overrun. Although Nepal’s development partners have expressed their commitments to provide necessary resources for development activities, the government is not in a position to use it because they don’t have the budget to add the counter part or matching funds. Despite all these things, donor communities have pledged to provide 110 billion rupees to Nepal. This pledge will be materialized when we will be in a position to put our contributions too in the basket. However, Nepal government is yet to bring an annual budget. Our country’s situation is bad. Thanks to this situation, Nepal’s opportunity to get that fund is doomed. It is unfortunate that we are losing our credibility. Had the budget been passed in time, many projects would have been completed. We would also save money. Poor people can die because of lack of budgets in hospitals. Hospitals and primary health care centers are out of budget. This will affect the life of poor and ordinary people.

Our policy is faulty. Even in normal situation with timely budget, we failed to deliver medicine to people. In this situation, there is no guarantee things will improve. Because of political reasons, the budget is not released. You cannot make Nepal bankrupt on political reasons. This is a crime of political leadership against the nation. On the one hand they have disputes with the UN, on the other hand political leaders are turning Nepal as a bankrupt nation. To save the nation from being bankrupt and to maintain the minimum growth rate, the political leaders should have to open the parliament even for one day and release the country’s budget. Political leaders must pay respect to the nation. It is unfortunate that ruling as well as opposition parties have shown no sincerity towards the nation. The victims of this unnecessary political deadlock are the common people who voted their leaders to run the government. If political leaders do not seriously think about the nation’s economy, the term nationalism will remain just as a part of political statement.  (As told to New Spotlight)

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