Nepal | July 17, 2019

Govt’s debt relief plan hits a major glitch

Himalayan News Service

KATHMANDU: The government’s ambitious debt relief plan for quake victims has hit a glitch, as concerned officials, who were asked to frame a guideline on the matter, are still not very clear of the concept.

On May 24, the Office of the Prime Minister and Cabinet of Ministers said debt of up to Rs 50,000 acquired by earthquake victims would be written off. The announcement was made through the Integrated Action Plan for Post-Earthquake Response and Recovery.

Going by the timeline incorporated in the action plan, the Ministry of Finance (MoF) and Nepal Rastra Bank (NRB) should have framed a guideline on debt relief within 15 days of issuance of the action plan.But nothing has happened even after three weeks.

“We are currently collecting data on loans acquired by residents of quake-affected districts from various institutions, including commercial and development banks, finance companies and microfinance firms,” said an MoF official, who is involved in preparation of the draft guideline.

The MoF is collecting data from banking institutions of the formal sector despite uncertainty over inclusion of private sector-led banks and financial institutions in the debt relief programme.

In the past, debt relief packages introduced by the government covered loans issued by state-owned banks like Nepal Bank Ltd, Rastriya Banijya Bank and Agricultural Development Bank.

“We are still not sure whether to incorporate clients of private institutions this time, although government seems to have shown interest in rolling out the programme among clients of both state-owned and private institutions,” said an NRB official.

Another issue that has not been sorted out is eligibility of borrowers with loans of over Rs 50,000 in debt relief programme. “We’re still unable to decide on whether to float the debt relief package among those who have acquired credit of over Rs 50,000,” said MoF official.

If borrowers with credit of over Rs 50,000 are entitled to debt relief, loans of up to Rs 50,000 would have to be written off by the government and the rest will have to be paid by borrowers.

“If such a provision is incorporated, the government will need to fork out billions of rupees, as there are plenty of people who have acquired loans of over Rs 50,000,” the official added.

“Also, it’s not clear whether Rs 50,000 incorporates only principal amount or both principal and interest.”

While officials of MoF and NRB are yet to tackle the issues, a directive recently issued by a parliamentary committee to include clients of cooperatives in the debt relief programme has further complicated matters.

“Cooperatives are not under the purview of MoF nor NRB. So, if we are to follow the parliamentary committee’s instruction, we’ll have to check the credit history of thousands of other clients, which would consume a lot more time,” the official said.

Cooperatives fall under the purview of the Ministry of Cooperatives and Poverty Alleviation.


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