Prior to the origin in China and spread therefrom of Covid-19 to other countries more than a year ago, trade war between the two largest economies (US and China) had played a major role in complicating global economic situation, adversely affecting world economic output and trade. Although the negative effect of the trade battle did not remain confined to the two countries in question, its direct impact remained limited to the economic front and has not been blamed for any major mishaps (famine, starvation and loss of human lives) till date.Indeed, trade-related problems have remained relatively manageable and not at all like this pandemic, which has rendered even the most powerful countries in the world somewhat helpless as far as timely control of its spread and the resulting harm to human lives(3.2 million deaths globally) and economies all over the world is concerned.It seems the entire world is fighting a painful battle against this resurging enemy of mankind and billions of dollars poured into finding an effective cure have produced some commendable results but a lot is still to be done in finding an affordable, effective and less controversial method to effectively stop the recurrence of it in different forms such as African variant, UK variant, etc. Expectedly, with the global spreadof this killer disease, world economy shrank in 2020 and so did the world trade and no exception were the major economies, which experienced sharp shrinkage. Many countries (such as US) saw unemployment level soaring to levels worst since great depression. Some firms in some countries could have done well even during these difficult times but the undeniable fact is that all the major economies have suffered a setback and are still struggling despite huge amounts, mostly in the form of stimulus package, pumped into them. Amongst major countries, China probably was the first to restore domestic demand and bounce back to positive growth, after successfully keeping under control the devastating virus. It may be noted that China’s economic recovery quickened sharply in the first quarter of 2021 to register a growth of 18.3 percent from last year’s slump, which has been possible by stronger demand at home and abroad and continued government support mostly geared towards tens of thousands of smaller firms, which were hit the most in China as is the case elsewhere. Another Asian giant, India, was affected adversely, both in terms of loss of human lives and economic output, during the first round of pandemic but the losses remained manageableand it appeared, until recently, that this political power of global scale had put its somewhat derailed economy back on track to resume its acceleration towards becoming a major economic power of global scale. Unfortunately, however, the situation now has alarmingly changed, with this populous country registering the highest daily number of infection (more than 300, 000 daily for more than two weeks in a row) in the world, acute shortage of hospital beds, oxygen and other necessary facilities. People are seen waiting in long ques at different crematoriums to perform the last rites of their dear ones. Realizing the increasing number of deaths from this disease and the unprecedented pressure on the existing facilities, makeshift funeral pyres are created and efforts are made to increase production and supply of oxygen and pandemic-related generous assistance from countries currently in a position to do so is gratefully accepted.Despite these efforts, Indian health system is collapsing under the latest record breaking surge. Situation elsewhere is also very serious and people are in know of the devastation caused earlier by the pandemic elsewhere such as USA, UK, Brazil,EU and many other countries but Nepalis had not panicked this way as they have now, after seeing what has happened in India in the last couple of days. What is seen in India now is not only painful but scary, too. Let us pray problems of this magnitude do not befall this nation already precariously placed on both fronts-political and economic. We may also have been little bit selfish in praying that things in our neighborhood get back to normal soon because a prolonged period of crisis there could seriously hurt our economic interest as we have to depend on India to fulfil the demand for almost everything from food to fuel. Any disruption in Indian supply chain could generate shocks to pave way for high level of inflation at a time when most economies elsewhere are already in recession on account of slacking economic activities and depressed domestic demand for goods and services. Euro Zone is said to be suffering double-dip recession on account of continued impact of the pandemic. Beyond doubt, Nepal’s economy is not at all in a good shape.
Nepal’s external sector has been suffering unchecked deterioration since long, which is adequately manifested by our ever increasing trade imbalance with most of our trading partners, the highest being with India followed by China. In the nine months of this fiscal year, trade deficit has exceeded Rs 1000 billion. Compared to the corresponding period of last fiscal year (2076\77), imports in the nine months of this fiscal year went up by Rs. 131.42 billion to hit Rs.1113 billion, while exports grew just by Rs.16 billion. Net service income has also remained negative by Rs. 39.69 billion in the eight months of this fiscal year, registering a sharp increase over the negative figure of Rs.4.22 billion during the same period last fiscal year. Travel income this year has taken a freefall (declining by 91 percent), while travel expenditure has declined by 54 percent. Available data show that Nepal is a loser on both fronts- service and merchandise trade. Deficit in current account has also increased over time, while balance of payment (BOP) has continued to remain positive and foreign exchange reserve looks sound when judged from its import-funding capacity. There is also a strong possibility of this government not meeting the revenue collection target as only 67.59 percent of the target (Rs.1011.75 billion) has been collected in the nine months of this fiscal year. This left government may create a record of not being able to collect the intended revenue for four consecutive years in a row.Likewise, foreign direct investment has sharply gone down in recent times and the pathetic picture of under spending of capital expenditure is likely to continue this time also as only about 29 percent of the allocated sum under the head has been spent in these nine months. In the midst of this dismal performance, however, multilateral agencies such as the World Bank (WB) and the Asian Development Bank (ADB) have thrown slightly positive information for the government to draw some solace from. Giving credit to continued steady flow of remittances, unlike an apprehended sharp drop, WB has revised upward its growth estimate to 2.7 percent from its earlier projection of 0.6 percent for this fiscal year.Likewise, ADB has stated that Nepal’s gdp will grow by 3.1 percent in the year 2021, a positive come back from a negative 1.9 percent registered a year earlier. Unlike Nepal government’s wished growth rate of 7 percent for this fiscal year, ADB’s projection is that Nepal will achieve 5.1 percent growth only in 2022(fiscal year 2079\80).WB also feels that Nepal will have to wait a few more years for growth to return to a satisfactory level. Nepal government, more specifically Prime Minister Oli, probably was not too wrong in assuming that after a contraction of gdp, a bounce back to positive growth (10 percent next year as publicly mentioned by him) is not unlikely but they seem to have ignored, while wishing growth levels, complications of various nature and magnitude faced by the nation they have been governing. They should have at least taken into account facts related to their slashing of budgetary outlay (especially capital expenditure), reduced FDI and continuous decline in government investment. In addition, situation is likely to worsen more due to the recent surge in virus(causing dozens of deaths everyday) as has been rightly mentioned by our central bankthat industries\businesses, already hit hard by the virus earlier, are likely to face problems in recovering because the second phase of pandemic could be more dangerous than the first phase when Nepal government took the much criticized phased decisions of keeping the country under lockdown for 120 days, bringing the economy to a grinding halt.Helplessly,it seems, the concerned have issued prohibitory orders again for 15 days and they are expected, learning from the earlier mistake, to do their utmost to keep the economy moving at least partially, if not fully. In addition to this pandemic, the political mess that the country is in since long has been a great retarding factor as far as development\growth of Nepal is concerned. Currently, efforts are on to dislodge not only the federal government but also provincial governments and Prime Minister Oli, it seems, is working day and night to foil attempts to remove him at the centre and his loyalists in different provinces.
Political instability has done serious harm to the nation\economy but has done no harm as far as continuation in power of a controversial but always confident- looking\sounding Oli is concerned. In fact, even the verdict of the Supreme Court (SC) that nullified his decision to dissolve the Parliament (lower house), did not shake him at all and he confidently continued to poke fun at his rivals (Parchanda\Madhav) that the celebratory mood the duo got into was meaningless. On the contrary, his rivals did not have even the slightest premonition of the misfortune that would soon befall them in the form of another verdict of SC (March 7) that threw buckets of ice-cold water on the celebrating duo and many others, invalidating the unification between CPN-UML and the CPN-Maoist Centre. Even the review petition filed against this verdict has been rejected by SC. Indeed, Oli has been tactfully outsmarting his political rivals in a planned way and no immediate threat is seen to his government, with not much unfriendly major opposition party(Nepali Congress), his friends-turned - foes with much weakened strength and a practically divided Janata Samajbadi Party(JSP) dozens of which leaders and cadres have recently been exonerated. Oli will probably have further weakened his political rivals before the parliamentary elections he intends to organize soon, irrespective of the outcome of the May 10 vote of confidence he has sought. Hope the two-third majority, which he expects to be returned with, is used in achieving the often-repeated prosperity of the nation and not wasted in gossip\scandal and political manoeuvre\manipulation as has been the case so far. In his next stint as head of the government, he has to show that a shrewd politician can be a competent economic manager, too so that people of this nation would stop thinking that politics practiced here has been as harmful an enemy of Nepalis as the pandemic.