Nepal’s debt burden has reached explosive proportions. Finance Minister Prakash Chandra Lohani, who has from time to time painted a promising picture of the economy since he took over the finance minstry, disclosed this while speaking at a programme on debt servicing in the capital on Wednesday. According to him, the country’s outstanding debts constitute about 70 per cent of its gross domestic product, that more than 30 per cent of its regular expenditure and close to 20 per cent of its foreign exchange earnings go towards servicing debt. Of late, the government’s internal revenue generation has been struggling even to meet its regular expenditure, leaving nothing at all for development. Hence, debts, internal and external, continue to pile up, while development remains retarded. Dr Lohani admitted that the balooning debt may push the country towards economic disaster, unless checked in time.

This big “if” is difficult to be resolved, especially because the country has been passing through a very difficult time. The government has let loose its security forces to crush the Maoist insurgency, and as a result the security expenses are balooning. Development and social sectors like health have become casualties, having long-term effects on the country’s development. But the unfortunate part of this scenario is that it does not seem to end the insurgency any time soon. A long, difficult and costly war is likely. The direct results of the poor security situation have been felt by the economy as a whole — business and industry are in the doldrums, agriculture is not producing much not least because of the poor security envrionment, and other important sectors are hardly in a better shape. A large part of the countryside is under the sway of the rebels. A good source of foregin exchange, however, remains to be the remittances from the Nepalis abroad for which the government can claim little credit.

Debt is not a bad thing in itself. But it can land any country in trouble, if it is not properly utilised to boost productivity, promote foreign trade and generate employment. In 30 years of Panchayat, implementation was hardly better than during the present multiparty era. And there is little evidence to support the thesis that it has improved since the October 4 Royal intervention. GDP growth rates in recent years have been disappointing, and the current year’s projection hovers at around 4 per cent, that, too, assuming a favourable monsoon and a good agricultural output, which are unpredictable in themselves. There are two broad aspects of managing the country’s debt wisely in the present context — resolving the Maoist problem and cutting waste. On both sides, political courage and wisdom are required.