ECONOMY Negative Trend

With all economic variables showing a negative trend, Nepal’s economy is in a critical stage

Jan. 8, 2018, 7:31 a.m. Published in Magazine Issue: VOL.11, No.12, January 05, 2018 (Poush21, 2074) Online Register Number: DOI 584/074-75

With declining flow of remittance, to 1.4 per cent, increasing trade imbalance with merely rupees 26.5 billion exports and 340 billion imports, with 25.81billion negative of balance of payment and revenue increase over 16.6 percent, these indicators of economy have shown that Nepal is not heading in a right direction.

Published by Nepal Rashtra Bank, in its intense and deep study, these indicators are the bases to understand the strengths and weaknesses of the country’s economy. Based on the four month analysis of Nepal’s economic indicators, Nepal Rashtra Bank has revealed that country’s economic health needs an overhaul.

Nepal received 228 billion rupees as remittance in the preceding four months, which is less than 1.4 percent of the same period of last fiscal year. Remittances, which occupy 29 percent of GDP, backed Nepalese economy for decades.  Nepal’s export is declining and import continues to increase. In the last four months, Nepal imported goods worth of 334 billion rupees and exported merely Rs. 26.35 billion.

The import has increased by 11.1 over the previous year. At a time when the remittances continue to decline and import increases, it will put pressure on Balance of Payment.

Had the foreign direct investment increased, Nepal would have a better foreign currency reserve. However, there are very few companies are coming for foreign direct investment.

At a time when Nepal’s economic health is showing a negative trend, Nepal recently concluded three tiers of elections, at the center, provinces and local levels.  There will be a demand for huge resources to develop an institutional setup in the local and provincial levels.

According to experts, Nepal will require 1500 billion rupees in the first year to implement federalism and it needs to invest annually Rs. 900 billion for decades to set up the institutions at the state level.

However, Nepal’s internal revenue situation is not satisfactory. According to Nepal Rashtra Bank, four months of revenue collection of Nepal show a very grim situation, with 16.3 as against expected increase of 20/22 percent. This increase is required to maintain concurrent expenditure.

With declining revenue collection, Nepal needs to go to borrow the money from international community to carry out development activities. Nepal now needs to ask development partners to carry out development.

Sources close to Ministry of Finance have already been concerned over the current state of economy. “As the provincial level governments are going to be established next month, we don’t know how to allocate budget to them,” said a senior official of Ministry of Finance.

With growing demands of consumptive products and declining export and remittances, Nepal’s economy is in a very crucial stage of difficulty. If things continue to go in this direction, it will have major consequences.

As Nepal’s politicians are busy in the formation of the new government, economy continues to be nobody’s concern.

 

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