Government considering new ways to fund bailout

KATHMANDU: The government may set up bailout funds and business recovery centres to ensure quick recovery of the productive sectors of the economy battered by the devastating earthquake of April 25 and its numerous aftershocks.

The government has expressed this intention at a time when the country’s economic growth forecast for this fiscal has been revised downwards from 4.58 per cent to 3.04 per cent after the quake and aftershocks hit production.

“Economic sectors that have borne the brunt of income losses need a package of support aimed at early recovery,” says the Volume ‘A’ of Post Disaster Needs Assessment (PDNA) report made public on Tuesday by the National Planning Commission.

Hence, ‘the government stands ready to respond with policy instruments that have not been frequently tried earlier, such as bailout funds to prevent contagion in the financial sector as well as business recovery centres to jumpstart small enterprises, including those headed by women in the agriculture and informal sectors’, says the 106-page report, which will be presented during the International Conference on Nepal’s Reconstruction on Thursday.

The government is set to introduce these measures as many sectors, such as tourism, agriculture, financial and industry and commerce, are expected to continue suffering losses well into the next fiscal year, which begins on July 17.

The agriculture sector, for instance, has seen losses of stockpiled grains, over 17,000 cattle animals and about 40,000 smaller, domesticated animals. In the mountainous districts hit by the earthquakes, production of potatoes, wheat and barley has dropped.

These losses are expected to increase further in the coming days, as risk of livestock mortality and diseases has risen due to the loss of feed and shelter. Also, the sector may witness shortage of labourers and other inputs during summer plantation season, reducing agricultural yields next fiscal.

Then there are fears of more landslides during monsoon, which may further disrupt agricultural activities. “This does not augur well for agricultural revival next year in the quake-hit districts,” says the report.

The situation is pretty much the same in the tourism sector, which is expected to suffer losses of Rs 62 billion over the next two years because of destruction of tourism-related supply of services and decline in tourism spending.


Among others, huge losses suffered by the real estate sector are expected to lead to moderate deterioration in the quality of loan portfolios of banks and financial institutions, which have exposure to real estate.

These factors will not only suppress economic growth but continue affecting livelihoods in the coming days.

The quake and aftershocks have affected livelihoods of about 2.29 million households and 5.6 million workers in 31 affected districts. This is expected to result in loss of 94.81 million workdays in sectors such as agriculture, commerce, industry and tourism in next fiscal, inflicting personal income loss of Rs 17.12 billion.

“Although personal income loss is equivalent to only two per cent of the total disaster effect (of Rs 706 billion), it is important to highlight that

annual labour earnings in Nepal are extremely low. Therefore, even a minor income loss has serious implication on poverty in the country,” says the report.

In this regard, the report has proposed formulation of ‘Working out of Disaster, Building Resilient Livelihoods Strategy’ to bridge the ‘continuum from immediate income generation to medium and long-term employment recovery’.

The estimated budget for implementation of the strategy — which focuses on extending skills training and cash for work programmes — stands at Rs 12.55 billion.

This strategy is ultimately expected to address the demand for skilled labourers during recovery phase, reduce outflow of workers to overseas labour destinations and even prompt overseas Nepali migrants to return.