Mismanaged Nepal

During the past ten years, Nepal’s economy grew on average by 4.4 percent. If we extend the time to cover a period of twenty years, average growth descends further to 4.1 percent. On average, economy in the last three years grew by just 1 percent. This year also, the economy is expected to grow by less than 4 percent. In terms of performance of the economy, the two governments, led by Oli and Deuba respectively, do not look much different.

April 24, 2022, 1:25 p.m. Published in Magazine Issue: VOL. 15, No. 17, April.22, 2022 (Baishakh 09. 2079) Publisher and Editor: Keshab Prasad Poudel Online Register Number: DOI 584/074-75

Although about half a dozen elected rulers and their die-hard followers would not like to publicly admit that Nepal has been grossly mismanaged over the last numerous years, prevailing situation on several fronts has adequately manifested the deteriorating state of the country. For more than a decade, the mess that the country was in was conveniently blamed on the Maoist struggle, with the state and the rulers repeatedly assuring that everything (law and order and the economy) will be normal once the struggle was over. Unfortunately, however, situation did not improve in that ordinary people kept on facing the shortage of basic necessities such as water, electricity and other essentials including fossil fuel that is becoming dearer day by day. Frequent changes of governments and the recent chaotic situation prevailing in all state organs speak volumes about the pathetic way state affair has been handled in this country. State of the economy has been very unsatisfactory, seldom registering more than 5 percent growth per annum. Unlike what was often promised to hard-hit people of this country, Maoists coming into the main stream politics and Prachanda’s ascendance to the chair of power also proved fruitless in terms of giving good governance. Dr. Baburam Bhattari also became prime minister on behalf of the Maoist party and his contribution also did not measure up to the expectation of the people. During the past ten years, Nepal’s economy grew on average by 4.4 percent. If we extend the time to cover a period of twenty years, average growth descends further to 4.1 percent. On average, economy in the last three years grew by just 1 percent. This year also, the economy is expected to grow by less than 4 percent. In terms of performance of the economy, the two governments, led by Oli and Deuba respectively, do not look much different. People now firmly believe that even the promulgation of the new constitution, giving a federal system of governance under a republican set-up, could not solve major problems faced by Nepal and its people. An attempt is made here to delve a bit into some of the major happenings, which would show the undesired situation prevailing in three state organs- legislative, judiciary and executive. It is deemed appropriate to begin with a discussion of the much talked about Millennium Challenge Corporation deal (MCC) about which a lot is still written and spoken.

Contrary to expectation, It took years to get parliamentary ratification of MCC (initiated years ago by then Nepal government led by Deuba), requesting the concerned US authorities for a grant of 500million dollars. While making the move years ago, probably Deuba and his finance minister Gyanendra Karki, who signed the paper then, had no idea that it would create so much noise and controversy in the following years. Despite involvement of all the major political parties in the deal and their more or less go ahead signal at one time or the other, frequent change of governments seems to have complicated it. People have seen over time major politicians’ position\opinion changing with their getting in and out of governments. Political fluidity seems to have been the root cause of this controversy and the delay. Looking at the speedy handling of MCC by Deuba in his fifth stint as head of government, it can be guessed that he could have closed the agreement earlier had his government lasted little more. The government that succeeded Deuba was also seen very positive about MCC in that it not only made budgetary provision for the project but got the proposal registered for the first time in Parliament. Perplexingly, however, out of power Oli-led party did not show understandable support to the deal, despite being urged by different quarters to clear its position. Probably aware of the divergent views on MCC of the partners in coalition government, Oli kept on maintaining that before anything else the dispensation should come up with a unified position on the deal, which at that time looked little difficult because all the ruling parties, with the sole exception of Nepali Congress (NC), were in no mood to vote for the agreement in its existing form. On several occasions, the government looked on the verge of collapse, with CPN-Maoist Centre(Maoist-C) and CPN Unified Socialist(Unified Socialist) threatening to vote against the deal and Deuba threatening to break the alliance and form a new arrangement in cooperation with Oli. Deuba worked very hard and did lots of running around to pass it because the US government, somewhat sick and tired of changing positions of our politicians, had set a deadline of February 28 to secure parliamentary ratification of the MCC compact and also threatened to grant the money allocated to Nepal to some other countries in queue for it. With cadres and even some noted figures of the left parties in government joining hands with other left parties in taking out rallies against MCC at several places, mainly Kathmandu, many observers thought a serious political accident was imminent. Deuba should be credited for succeeding in keeping the situation intact; taking resort to different methods such as placating Oli and Janta Samajbadi Party (JSP) chief Mahanta Thakur and threatening his coalition partners that they would be jettisoned should they fail to cooperate with him. This running around by Deuba paid good return in that he was able to keep his leadership of government intact with the same coalition partners who had been opposing the deal. There is no doubt that common people were deeply confused by political leaders some of whom(mainly belonging to left parties) kept on putting across their belief that the deal was a part of Indo Pacific Strategy(a military alliance consisting of countries such as US, India, Australia and Japan) and some of the provisions in the agreement would go a long way in endangering our sovereignty and territorial integrity, while some notable politicians like Dr. R S Mahat of NC maintained that it was a pure grant to be used for construction of electricity transmission lines and road upgradation and there was nothing in it to panic about .In the midst of controversy, street protests and main opposition UML’s continued obstruction of House proceedings, the Parliament on February 27 ratified the deal with a 12-point interpretative declaration. Despite continuing post-ratification opposition calling it unequal and against national interest , Nepal government will have to expedite its execution in a transparent way, which could clear remaining doubts about the grant and ensure timely completion of the envisaged projects. For now, Deuba’s manoeuvres, a form of art at which excels, has saved his leadership of a shaky coalition government and also provided some relief, albeit temporarily, to Speaker Sapkota who has been facing the onslaught of UML for months now.

Indeed, Sapkota has been at the center of a chaotic House characterized by continuous obstruction of its proceedings by the opposition lawmakers, demanding his resignation. It may be noted that Sapkota is accused of helping Madhav Nepal form a new party by not confirming the suspension, as requested by UML, of fourteen lawmakers who ultimately succeeded in forming a new party (Unified Socialist) under Madhav Nepal. This inaction or bias of Sapkota is thought to be the major reason that led to the untimely collapse of UML-led governments not only at the center but in many provinces, too. It is, however, surprising that instead of introspecting a bit to see what led to the downfall of these governments when the Oli-led government enjoyed almost two-thirds majority at the federal level and what caused the split in the merged communist party and compelled Madhav Nepal to form a new party, it seems Oli and his followers in the House have focused mainly on whipping Sapkota. Uml’s continued obstruction of House proceedings has prompted many observers to question the validity of our political system, and also questioning the expenditure of millions of rupees every month to keep the nonperforming House alive. Very important bills have remained stalled. In the last seven months or so, the House passed, in the midst of obstruction, only the new budget and the MCC agreement. For all practical reasons, UML lawmakers were seen making some noise but made no serious efforts to obstruct presentation ad passage of the budget. As per parliamentary ratification of the deal, UML lawmakers had no business obstructing it as it was supported by Oli while in government.

Very surprisingly, President Bhandari, on recommendation of the government, prorogued the on-going session of the Parliament from midnight of March 15, 2022, rendering fate of some important bills including citizenship bill uncertain. It may also be noted that the House had formed an 11-member impeachment recommendation committee to look into the motion filed against Chief Justice Cholendra Shumsher Rana on February 13. The House was supposed to commence discussion on the impeachment motion starting March 16 but the sudden prorogation of the House has stalled all proposed parliamentary activities related to Rana who remains suspended ever since the filing of the motion against him. Oli has more or less succeeded in rendering the Parliament, twice dissolved by him and resurrected by the apex court on each occasion, jobless and it is very likely that the budget session of the parliament will also not be allowed to do other work beside providing floor for annual rituals such as presentation of government’s annual policy and programme and letting the finance minister submit and clear the budget. It is, however, very unclear what political\electoral gains Oli intends to achieve by keeping the resurrected Parliament in this state. It may be noted that a number of cases, including one alleging Sapkota’s direct involvement in a murder case years ago, are lying at the Supreme Court, which has in recent times reached the peak of controversy in its history.

Revolving around four chief justices, situation in the apex court remained very unpleasant in the last couple of years, starting with the impeachment motion filed in the Parliament against then Chief Justice Sushila Karki. Although the situation quietened a bit after nullification of the motion by the apex court, deterioration in working environment began again with the replacement of Karki by Gopal Parajuli who was accused of forging documents related to his age. Parajuli kept on resisting the accusation boldly for some time but ultimately gave in to the accelerating pressure for his resignation from different quarters. A number of parliamentarians belonging to the left party played a key role in ousting Parajuli. Parajuli did not get the expected support from his long time buddies (Deepak Joshi and Cholendra Rana) who were impatiently waiting to be in the top position. Joshi could not be confirmed owing to strong opposition of communist lawmakers in the Parliamentary Hearing Committee and was somewhat forced out of the apex court, despite his desire to continue even as a mere Justice of it. It may be noted that Parajuli, Joshi and Rana were good friends and jointly worked to clear hurdles created by their opponents to check their upgradation in the system. It is said, for example, that a strong group in the judiciary was working hard to make sure that the trio retires well before their time to reach the top post. Quite a few legal experts were appointed as temporary justices who, many thought, would be made permanent over time, which could stop the trio’s vertical mobility. Smelling the design against them, these three friends worked day and night and left no stone unturned to get the hurdles cleared. United, they emerged victorious, but when they started working against each other, they fell one by one. The youngest of the three (Rana) is now talk of the country.

Rana, accused of promoting corrupt behavior, amassing wealth, anomalies and aberration in the judiciary, is fighting the battle all alone. UML has opposed the way the motion was filed in the House but has stayed away from throwing the party’s weight behind him as many in the party seem to have advised Oli against openly supporting him, which could cost the party dearly in the forthcoming electoral battles. Different bodies, including association of retired justices, and individuals repeatedly exerted pressure on Rana to resign. While Nepal Bar Association in cooperation with Supreme Court Bar launched the protest against him, demanding resignation, most of his fellow justices refused to share bench with him basically to facilitate his ouster and Deuba was also said to be in favour of this to resolve the prolonged crisis in judiciary. All these pressure tactics did not yield expected result as an adamant Rana did not budge an inch from his original stand of following the constitutional process, despite being warned of consequences. He continued to stick to his position in a very adversarial environment, quietly digesting the indignity of being publicly humiliated by his own subordinates and professionals belonging to the same community. It may be noted that Nepal Bar had first sought his resignation and on failing to get him do so, the lawyers’ body later urged political parties to impeach him. In a way the initiator of the motion are correct that the impeachment motion was moved as all other avenues to check him had failed. It is, however, equally important to see whether a favourable working important has been created at the apex court after Rana’s suspension. It looks like acting chief of the apex court Mr. Karki and his subordinates are still not in a position to work fearlessly, which is manifested by their inability to give verdict on a number of controversial cases involving former dispensation led by Oli. In a way, Oli is right in asserting that mere ouster of Rana from judiciary would not solve the problem because a number of other justices have also to be initiated action against because they are equally responsible for creating the mess that the apex body is in today. A shrewd and revengeful Oli is very much feared in this country and many thought Deuba government initiated motion against Rana will soon be followed by another UML initiated motion covering current officiating chief and some other justices who decided in favour of resurrection of the Parliament, offending very much the UML chief. With the passage of time, however, the fear of another impeachment motion seems to have slowly faded away and no major cases of irregularities have been noticed at the apex court but the environment there has to be improved a lot, which may require effective support of other organs of the state as well. Judiciary is still not in a position to function independent of wishes and aspirations of our leaders, whether in government or in opposition. Serious injury has been inflicted on the Supreme Court of this country and Rana alone is not responsible for this. People are curiously waiting to see how effective the current dispensation becomes in helping the judiciary heal its wounds, which can be effected through creation of an environment in which the concerned can work fearlessly and also selflessly.

Oli-led government remained full of controversy throughout and so is the state of current dispensation led by Deuba, which is being ridiculed for some of its highly controversial decisions. Starting with the induction into government of a businessman, most of the decisions of this dispensation have remained highly controversial. Specific mention could be made of recent ambassadorial appointment, which has been highly criticized, the media accusing Deuba and other alliance leaders of nepotism and favouritism and letting money immensely influence their decisions. It has also become a matter of common understanding that with local polls around the corner(less than a month now), mobilizing resources needed for it seems to have been the major concern of influential people. Decisions are made often ignoring peoples’ feeling and not bothering what impact would a particular decision have on the national economy. A more or less condemned act of this government has been its decision to allow import of beetle nuts, which is imported paying dollars and most of which is exported to India. Oli-led government also made this kind of decision, allowing individual businessmen to import25000 tons of the stuff, but exporting it formally became difficult later when government of India tightened rules. It may be noted that a ton of beetle nuts is purchased at 2500 dollars, which is adjusted downward by our government at 1050 dollars for export\smuggling purpose, depriving us of the formal flow into Nepal of Indian currency we are in dire need of and which for us is as hard as American dollars. It may be noted that Government of India has fixed import price of it at 2600 dollars to check its undesired import. In Nepal, it has been a kind of state sponsored smuggling, which benefits decision makers and the unscrupulous traders involved. Very frustrating is the fact that this decision was made at a time when the licensing ministry was under Deuba’s direct jurisdiction and foreign exchange reserve had shown signs of significant depletion. It may be noted that foreign exchange dropped to Rs.1171 billion, registering a decline of 16.2 percent in the 8 months of this fiscal year, which is just enough to cover import of goods and services for 6.7 months, a sharp drop from earlier level when the reserve was enough to fund import requirement of goods and services for 11.3 months. Owing to sharp increase in imports, there is tremendous pressure on balance of payment and current account. Current account deficit has increased to Rs.462 billion this fiscal year, a sharp deterioration compared to the deficit of Rs.151 billion in the corresponding period of last fiscal year. In the nine months of this fiscal year, trade deficit has approximated Rs. 1290billion.Revenue collection has been satisfactory so far but it is likely to take a hit, import based as it is, with enforcement of government’s recent measures to check imports. Further, owing basically to external situation, inflation has gone up from 3.03 to 7.14 percent. Likewise, till the last day of the tenth month of this fiscal year, capital expenditure has been just 26.81 percent (Rs.101 billion), while it was 30 percent(Rs. 105 billion) during the same period last fiscal year. Despite visible setbacks on several fronts, it is perplexing that our government is taking so long to admit that their wished growth of 7 percent is unachievable this year.

In the midst of several controversies and debacles, Deuba government has committed another blunder by suspending, initial step prior to dismissal, RastraBank (central Bank) governor Maha Prasad Adhikari who was discharging his responsibility quite well. This has invited lots of criticism and the authorities are relentlessly attacked by the press for this unjustifiable act at a time when Corona devastated economy is being further complicated by external shocks emanating from Russia’s invasion of Ukraine. Fortunately, the apex court has stayed this decision of the government. People have seen Deuba dragging along difficult coalition governments in the past and this time around also he succeeded in getting the MCC ratified without letting the government fall apart, which many thought was difficult. It’s high time that Deuba worked hard to stop the economy and the nation from crashing and also help clear the unhealthy dirt accumulated in other state organs. Disappointing ,however, is the fact that Deuba-led organ(executive) appears to be in no less serious a mess than the other two- judiciary and legislative. May Lord Pashupatinath continue to save us? Happy New Year 2079!

Dr. Rawal is a former governor of Nepal Rastra Bank


Dr. Tilak Rawal

Dr. Rawal is former governor of NRB.

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