Sunday, 9 August, 2020

Recovery And Resilience

The government had lifted the four-month-long lockdown since last Wednesday but it has continued restrictions in the areas where the people assemble in a large number that can risk the transmission of COVID-19. However, the extended lockdown, enforced to contain the virus’s spread, has crippled the economy beyond the immediate recall. One economist has estimated that around 4.5 million Nepalis have lost their jobs owing to the lockdown. One rational behind the resumption of business is to avert the looming starvation and scarcity that is haunting those deprived of their sources of livelihoods. While allowing running vital commercial entities, government and private offices and vehicles, among others, the government has urged the public members to adopt all health precautions against the coronavirus.

Both the government and the private sector are under pressure to revive the economy struck down by the virus. According to the World Bank, Nepal’s economy would contract sharply to 2.1 per cent in the current fiscal year against the government’s projection of 7 per cent. Decline in tourism and remittance inflows, and supply chain disruptions will lead to the sharp decrease in the industrial and agriculture outputs. The world’s lending agency has stated that low economic activity and oil prices would also keep imports low and below the pre-crisis levels. The imports have been drastically reduced, which will hit revenue collection target. Amidst a sea of challenges, it will be an uphill battle for the government to get the country back on a sustainable and inclusive growth path.

Against this backdrop, the World Bank has proposed a three-phase action plan to move the economy to resilience. They include relief, restructuring and resilient recovery phases. Unveiling Nepal Development Update 2020 the other day, the WB said that the present crisis would require a multi-faceted response given the wide-ranging impact of the pandemic. The ‘actionable measures’ for the government include wage subsidies and suspension of import duties for critical supplies, and a time bound subsidised emergency financial package for priority sectors like tourism and agriculture in the relief phase. It recommends that the federal government should support the local levels in the distribution of relief packages, including seeds and fertilizers to the farmers and procure agriculture produce to respond to food security needs.

Under the restructuring phase, the government has been suggested to expand the coverage of mobile banking and digital financial services, promote digital literacy and establish information technology centres, simplify investment approval process and provide fiscal incentives. In order to make economy resilient, a host of policy measures such as investment climate reforms including the foreign direct investment, increased access to finance through digital services, long-term insolvency and out-of-court procedures, and guidelines to support environmental management should be taken. For the quick economic recovery, workers and firms in the informal sector should be provided immediate relief. There should not be delay in introducing the incentives to agribusiness-based and forest-based small and medium enterprises (SMEs) as they can absorb returnee migrants and avert impending food crisis. The new monetary policy has already announced measures to stabilise macro economy which should be implemented effectively. The development partners such as the World Bank, Asian Development Bank and IMF should extend economic support to recover the nation from the coronavirus-induced crisis without affecting the nation’s aspirations to create a socialism-oriented economy and welfare state. 

How do you feel after reading this news?