Economy heads for crisis: Pant
Kathmandu, March 27:
Dr Raghav Dhoj Pant, a senior economist and former member of the National Planning Commission (NPC), has warned today that Nepali economy is reeling under a severe crisis, keeping in mind the lack of direction in the financial sector, deteriorating fiscal situation and monetary sector.
Pant, who is also the executive director of Institute for Development Studies (IfDS), said economic indicators indicate the pathetic economic outlook of the country, compared to three months back. He said that despite economic problems having been aggravated in recent months, the government and political parties do not have development programmes in their priority list.
He said that 104,000 youths have already migrated to other countries in search of jobs in the first seven months of the current fiscal year which is two per cent of the youth in the age group of 15 to 29.
The migration of people will ultimately hit our GDP growth, he said and worried that National Planning Commission (NPC) has come out with ‘no’ workable policies and programmes for development that shows that they are behaving irresponsibly, said Dr Pant. What is worrisome is that National Development Council’s (NDC’s) meeting has not been held since the last four years, he said. NDC is the highest policy making body of the country.
According to IfDS report, the problem of inflation has increased by 8.8 per cent in the past six moths which is double the rate prevailing in India.
Prices will be further aggravated due to rising political conflict, increase in inflationary expectation of the general public and the rise in the price of petroleum products, says the IfDS study.
He also disclosed the figures that the general public has suffered a loss of Rs 25.8 billion from inflation in the first six months of the current fiscal year. Dr Pant said that the government has initiated no new measures to control inflation. He commented that the foreign exchange management is not being done properly.
He alleged that the central bank had ignored the alarming situation of banks. The promoters of the banks themselves have used resources of banks far in excess of legal limits and have shown a tendency to provide loans to friends and relatives without proper security and limit, Dr Pant alleged.
GDP will not increase by more than 2.5 per cent which is equal to the annual growth in population and the per capita income will remain constant at the previous year’s level, Dr Pant said. Economic characteristics have indicated that there is ‘stagflation’ in the economy. Similarly, there has been no improvement in the fiscal position.
IfDS estimates that the government will not exceed Rs 76.56 in its revenue collection, facing a shortfall by over seven billion rupees. The government is not in a position to repay its foreign and domestic loans. And the revenue has turned negative in six months, said Dr Pant. Despite the revenue collection in the current fiscal year having been estimated at Rs 81.82 billion, revenue collection at the close of eight months of the current fiscal year stands only at Rs 41 billion.
IfDS also expressed worries that the problem of capital flight is going to increase further due to possible increase in deposit rates offered by commercial banks in India that will further widen the interest rate disparity between Nepal and India.