Recovery And Revival

As the new government has taken shape after the conclusion of the parliamentary elections, the central concern expressed from different quarters, and the challenge facing the new executive team of the nation is the economy. Currently, the economic situation of the country is under dire straits due to the factors both domestic and international. In this context, fixing the economy and saving it from worsening further should be the top priority of the government.

While the general people are suffering under the crushing impact of the unprecedented inflation, the business and industrial community is clamouring before the government to make some interventions related to interest rates, workable loans and making import free from all restrictions. Official delegations of different business fraternities have met with the Prime Minister Pushpa Kamal Dahal 'Prachanda', Deputy Prime Minister and Minister for Finance Bishnu Prasad Paudel and Home Minister Rabi Lamichhane to express their woes about the economic condition. 

The Prime Minister and the Finance Minister have made it amply clear that addressing ailing economic condition of the nation will be the major focus of the new government. But a bid to resolve the problem in a narrow and partial perspective will not take the situation out of the doldrums. An objective and comprehensive analysis of the problem with inputs from economists, businessmen and the central bank officials is needed to take new decisions. Regular monitoring and progress analysis of the decisions are also necessary because the remedial measures that fail to bring positive results may need to be amended. 

Maintaining a balance of payment, controlling the worrisome trend of foreign exchange depletion, rising inflation, liquidity crunch and bank interest rates are the outstanding issues regarding the current economic situation. Economic activities hard hit by the COVID-19 pandemic were on gradual path to recovery when the world economy faced abrupt supply disruption, inflation and economic recession after Russian invasion of Ukraine. Nepal was not an exception to the ripple effects of the skyrocketing of the petroleum fuel prices and commodity price rise it triggered over the world.

As the conflict in Ukraine heads to complete one year shortly, there is no sign of global economic recovery. Nepal's import trade in petroleum products, food and garment is heavy while its export trade is negligible. This has had its impacts on the balance of payment and increasing trade deficit. 

Towards the end of the previous fiscal year, Nepal imported heavily which brought a dwindling in the foreign exchange reserve and negatively affected the balance of payment. To deal with this situation, the government enforced a ban on the import of some luxurious items such as auto vehicles, liquors, expensive mobile phones and television sets. The move stopped foreign currency going out of the country but it also caused a decline in the collection of revenue. Traders said that some of the items banned for import were actually pivotal for domestic production. 

Bank interest rates were raised in order to prevent the rate of inflation going out of control. Business community said that it is counterproductive as it will stop the desired flow of capital into investment including those in the production sectors. Following the pressure from the business community, the ban on the import of luxury items was lifted but the economists warn that this will have negative repercussions. It may please the businessmen but may do harm to the total economy. Now is the time to save the economy and once it recovers, other normal rewards can be collected later. It is the call of time to move cautiously rather than looking into short-term benefits.