Himalayan News Service
Kathmandu, January 2:
Senior economist and bankers have noted that economy has reached a turning point, thanks to a whopping rise in inflation and decline in income.
â€œIf one analyses the data, national economy has reached at very critical point, which needs an urgent attention. Otherwise the consequences will be much costlier,â€ said Dr Raghab D Pant, a noted economist and chairman of newly formed Nepal Financial Economists Association (NEFEA). He also said that gross domestic products (GDP) growth has not been able to pick up as desired, whereas the population growth is on rise. â€œLow GDP growth against higher population growth has been further deteriorated with capital fly that has been observed recently,â€ he added. Referring the framework and targets of current fiscal yearâ€™s budget, Dr Pant said that the annual target would hardly be achieved. â€œItâ€™s unfortunate that the governmentâ€™s plan formulation to the implementation and monitoring; none has been progressively stepped up. Moreover, the ongoing conflict has even worsen the situation,â€ he added. According to a projection of NEFEA, the GDP growth in the current fiscal year will hover around three per cent, lower to the government estimate at 4.5 per cent. While, the inflation rate, which is predicted to maintain at four per cent, will surely go up by 3.7 per cent growth of agriculture sector is hypothetic. All major economic activities â€” tourism, manufacturing, investments and exports â€”reported major downslides as the conflict is escalating everyday. Though trade balance has improved mainly due to decline in imports, but the revenue is also declining.
Summing up all these facts, Dr Pant claimed that the national economic activities would be neither instrumental in increasing per capita income nor able to play an effective role to reduce poverty. â€œThe stagnant position of per capita income growth and skyrocketing inflation rate have already shown symptoms of â€˜stagflationâ€™ in Nepal,â€ he warned. Dr Pant further said that the rest six months of current fiscal year would be more difficult for the private sector and the economy may worsen, if the prevailing challenges are not properly addressed on time. â€œThe termination of multi fibre arrangement, slump in tourism industry and deteriorating investment climate in the backdrop of escalating violence will bring tough challenges for the private sector,â€ he said.
â€œAt a time when the government itself has not been able to spend allocated budget in the needy areas and sectors. How can private sector investment see improvement?â€ he added. According to Nepal Rastra Bankâ€™s three months data, the government has spent Rs 820 million for development activities whereas its regular expenditure has crossed Rs 12 billion.
Despite constraint in per capita income growth, consumption patterns have not changed because of increased inflow of remittances, which has also swelled the government revenue and foreign currency reserve. â€œBut inflow of remittances has decreased in recent times and forex reserve has also been gradually declining, which will surely slacken the imports resulting in decline in revenue,â€ said Narendra Bhattarai, general secretary of NEFEA.
He said that the economy might face serious consequences, which is largely dependent on remittance and revenue on imports. â€œThe uncertainty and insecure future prospect have fuelled the capital fly mainly through traditional channel of â€˜hundiâ€™,â€ he added.
The newly established NEFEA comprises of 11 members including, Ram Binod Bhattarai as vice-chairman and Narendra Bhattarai and Bijaya Ghimire are general secretary and treasurer respectively. Damber Dhungel, Dr Dilli Raj Khanal, Prithvi Raj Ligal, Sashi Raj Pandey, Santosh Adhikari, Satyendra Pyara Shrestha and Ganesh Bahadur Thapa are the executive members.