Is Nepal Grappling With Economic Recession?

If you take a stroll around the New Road area, the business hub in Kathmandu, you will frequently come across many stores with notices stating "TO-LET" or "ON SALE," along with contact numbers for those looking to rent or purchase them. However, the area that was once a place where people would feel lucky to get even a tiny space to run their business has surprisingly lost its initial prominence and charm. People in every teashop, meeting, and group are found anxiously buzzing that it is all due to the possible consequence of the economic recession the world is worried about at present.

Owing to the growing economic crisis, some of the business stalls in New Road have already shut down, while some of them are kept on sale. After failing to pay rent, some businessmen have absconded by selling their businesses for even half the price they would actually deserve, or by handing over the shutter key they have rented along with the business to the house owners. Success stories are hardly heard while there are woes and grievances everywhere. House owners, business entrepreneurs, customers, porters, banks, and co-operatives all have their own stories to narrate.

Heartbreaking Stories

The complaints of landlords about the rent the tenants or businessmen couldn't pay for months, and the arguments some raise over the rent every time they approach to pay, are rampant to be heard. "Two of the commercial shutters of my house, which were a mere source of our family income, have now been closed for months as nobody comes looking for them now. Being a house-owner in 

New Road, if I face so much difficulty in navigating my family's finances, how can anyone sustain on such a slow business movement while paying such a high rent?" said Sandip Shrestha, a landlord in New Road.

The stories of businessmen are no less heartbreaking. "The one day's business of earlier does not happen even for a whole month now. Neither banks are willing to lend us loans for a moderate interest rate nor does the government extend its assistance in tackling the situation. How to pay the rent, how to educate the children, and how to run the household expenses? During my 15 years of business experience here, I have never undergone a hardship like this before. If this continues any longer, the business has to be abandoned, knowing nothing to do next," said Kapil Ghimire, a stationery businessman at New Road.

The COVID-19 pandemic has created significant challenges for businesses in Nepal. Many are struggling to survive and some are uncertain whether they can continue operating. Some businesses are experiencing low transaction volumes, and increasing credit transactions, which are unlikely to be recovered. Despite reports of national economic recovery, the situation for many people is not improving, and may even be getting worse. 

This is especially true for porters and wage-earners who are experiencing growing inflation and recession, as the businesses that would typically employ them for daily wages are themselves struggling to stay afloat.

The situation is dire for some individuals. Kanchha Lama, a 56-year-old porter from Ramechhap, has spent most of his life in Kathmandu, leaving his family behind. For years, he managed to support them, but now he is struggling to make ends meet due to the lack of work and increasing inflation. "How can I manage to meet the day-to-day expenses of my family now?" he laments.

Adding to the challenges faced by many Nepalis are the deceitful cooperatives in Kathmandu, especially in New Road and Mahabaudha. These cooperatives have cheated people, including business owners, by running away with their deposits or failing to refund their money. Many depositors have lost faith in the cooperatives, causing a liquidity crisis and threatening their existence. Shyam Bogati, a business entrepreneur from Om Bahal, is one of many who has been cheated by these cooperatives. He has been trying to withdraw his deposit from Naitik Multipurpose Co-operative Ltd for four months, but has been given various excuses and has yet to receive his money.

Overall, the situation in Nepal is challenging for businesses and individuals. The effects of the pandemic, coupled with inflation and recession, have created a difficult environment for many people. The deceitful cooperatives in Kathmandu have further exacerbated the situation, causing financial losses for many individuals and businesses.

The story of some honest cooperatives is quite different. Due to the bad intentions, irregularities, and malpractices of a few, all cooperatives are unfortunately viewed as the same. As a result, we are now all facing a crisis. The recession, bad debts, investments in unproductive sectors, liquidity crunch, and the downward trend of the share market have brought us unexpected troubles. However, it does not mean that we are all frauds and dishonest people, as we are sometimes perceived. As Govinda Baskota, a New Road-based cooperative entrepreneur, stated, "May the situation turn for the better soon."

The scenario in the heart of the country's business hub speaks volumes about the overall situation of the country. Has a recession really set in the country as rumored? With trade deficiency, interest rates, and inflation increasing while the share markets, domestic products, people's income and possessions of money, availability of essential commodities, and foreign currency reserves decreasing, experts claim that these are the signs of an economic recession, and unfortunately, Nepal is experiencing almost all of them.

Combating Situation

According to the Nepal Rastra Bank report based on seven months' data ending mid-February 2021 (or the report of mid-April 2022), inflation remained at 5.97 percent on a year-on-year basis. Imports increased by 42.8 percent, exports increased by 88.3 percent, remittances decreased by 4.9 percent in NPR terms, and 5.8 percent in USD terms, and the balance of payments remained at a deficit of Rs 247.03 billion.

As a result, people can hardly see the movement of money in the market. The expectation was that things would return to normal after the three levels of elections in the country: the local elections in May 2022 and the provincial and federal elections in November 2022. But unfortunately, the liquidity crisis continued.

The reasons behind the recession are not limited to the country alone. The effects of political instability, the COVID-19 pandemic, and the Russia-Ukraine war are among the reasons to blame for this global economic recession that is surfacing through various events one after the other, according to experts. The closure of a reputable New York-based Signature Bank following the shutdown of the second-largest US bank named Silicon Valley Bank is a consequence of the global recession.

Thus, those in power must take urgent and pragmatic measures at the national level to combat the situation and revamp the ailing economy. Adopting certain measures to revitalize the economy is necessary before the situation turns horrendous

(Phuyal is a freelance journalist. ckphuyal1975@gmail.com)