By Ajay Chhetri, Kathmandu, Jan. 12: Economists of various government agencies and academic institutions have expressed optimism of better macroeconomic indicators in 2022.
Although Nepal's economy is going through a challenging situation due to deficit balance of payment, sluggish capital expenditure and small scale inflow of foreign direct investment (FDI) specifically after the second wave of COVID-19, eminent economist and also the Department Head of the Central Department of Economics of Tribhuvan University, Kritipur, Prof. Dr. Shiva Raj Adhikari, Economic Advisor of Ministry of Finance, Dr. Surendra Kumar Upreti and Executive Director of Nepal Rastra Bank (NRB), Dr. Prakash Kumar Shrestha, have expected improvements in macroeconomic indicators of Nepal.
Prof. Adhikari noted that economic performance is in challenging situation and that living standard has been declining due to rising health cost. He underlined the need for the economic growth driven basically by the large scale domestic investment. He, however, highlighted that the foreign direct investment (FDI) which could impact the domestic sector should not be encouraged.
He pointed out that rising imports and low domestic investment in the productive sector have become most tough barriers for Nepal’s economy. The non-economic factors like unnecessary political speeches, investment through informal channels, modes of running economy by different political parties also affect the economy, according to him.
Prof. Adhikari observed that researchers are lagging in contributing to policy formulation and enactment of necessary legislations. He shared that the TU's central department has been taking initiatives with foreign universities and different international organizations to conduct research involving the students and faculties to present a vision based on current reality of economy.
Dr. Upreti, economic advisor of the finance ministry, believed that economy has been hitting rapidly in the current fiscal year (FY). He informed that the private sector has been operating in 65 to 75 per cent of their capacity which is unprecedented. Current state of high demand of liquidity is outcome of rising demand of credit in private sector. He reiterated the current government intends to scale up of capital expenditure so as to lay foundation to leverage growth. He remarked that efforts of the finance ministry have been to motivate the concerned line ministries to expediting capital expenditure. Dr. Upreti believed that amendments in policies, acts, and regulations are the need of this hour to spur up capital expenditure. He also assured that capital expenditure will gain momentum after mid-January 2022.
Dr. Shrestha, executive director of NRB, viewed that pivot of the current stress in the external sector is an outcome of shrinkage in inflow of remittance and growing imports. Shrestha thinks that current shrinkage in liquidity is a symptom of leakage of currency due to excessive imports. He, however, expects that the measures taken by Nepal Rastra Bank (NRB) will discourage the scale of imports. Shrestha also expects that the inflow of remittance and tourism in future will improve the balance of payment (BoP) apart from uplifting the position of foreign exchange reserve as the COVID-19 vaccines would reduce the uncertainty.
He also said that the inflow of the FDI is improving but a large amount of FDI pouring in is for the same venture instead of a new one.