Time For Policy Shift

For some time now, the economy of the country is passing through difficulties. The government is receiving revenue that is hardly enough to meet the recurrent expenditures. The revenue collection has limited to only 45 per cent. After the strong recovery in fiscal year 2022, the economic growth has slowed in fiscal year 2023 owing to national and international factors. In order to solve the problem, the government resorted to tighter monetary policy and import restriction measures. The import control steps had to be eased to boost revenue and production stimulation. In spite of positive growth in the services and agricultural sectors, real GDP growth has gone down in this fiscal year. Furthermore, a decrease in construction activities, the lower registration of new businesses, slower credit growth to the private sector, and lower imports of intermediate and capital goods point to a decline in private investment. 

But economy is not in the critical condition as has been reported or rumoured. There is improvement in foreign exchange reserves and remittance inflow. The 2015 Gorkha Earthquake, COVID pandemic and recent Russia-Ukraine War could be blamed for the increasing crisis in economic sphere but the concerned stakeholders should not live idle and indulge in blame game. The government and private sector have collective responsibility to improve the country’s economy. The two sectors should be very serious about increasing the volume of revenue and its proper mobilisation. The problem in capital spending shows that public fund is not being utilised that is essential to spur economic activities, generate employment and build vital development infrastructure. There is a need of expediting investments to accelerate economic activities. The current liquidity problem could not be addressed without facilitating real estate transactions. 

It is high time the government and private sector moved hand in hand to fix economic woes and make the country prosperous. They should first focus on increasing production and generating employment. The country heavily depends on import trade for raising largest chunk of revenue. This should shift to the domestic production and market growth. The import sector has been hit hard. So is the revenue generation. The tight monetary policy taken by the Nepal Rastra Bank to control inflation has helped make the economy somehow vibrant. But monitory policy alone cannot control inflation because of the country’s import-based economy. That’s why the increase in production and employment within the country is inevitable. The booming banking sector also is in crisis nowadays. The government should pay due attention to the security of banks and financial institutions and raise their confidence.

The small and medium financial institutions also suffer from economic slump. Those who take bank loans but don’t pay should be encouraged to pay back. But this is possible only when their business is robust and vibrant. Even though there are some positive signs in the economy, the morale of the investors is not high. The economy can be accelerated to achieve sustainable economic growth and fulfil the aspirations of the common people through the proper coordination between the government and the private sector as well as monetary and fiscal policy. The government is on the eve of formulation of policy and programmes and budget for the fiscal year 2023/24. So it should bring strategy to come out of current economic downturns.