Nepal | September 27, 2020

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The remittances are mostly used for consumption, to pay the heavy import billls, but have not been productively used in any significant degree

The pre-Budget Economic Survey of 2014-15 that reviews the performance of the national economy during the year was released on Sunday. The economy has been hit hard by the major earthquake of April 25 and its aftershocks, bringing down the national economic growth rate to three percent.

The revised estimates made before the earthquake had projected the economy to grow at 4.6 per cent. However, the original growth projection made in the budget speech a year ago was six percent. The
present growth rate is the lowest in the past eight years, whereas the average growth rate over the
past decade is 4.1. On the positive side, the debt burden of each Nepali family has fallen by Rs. 1,731. In comparison, the per-person debt burden last year stood at Rs. 20,068. This reduction in debt has not added worries to the government on this count, as the government is in a position to increase its borrowings to finance the various development activities particularly at a time when the large parts of the country have been devastated by the earthquake. Such borrowings are urgently and badly needed if the country is to recover from the disastrous effects of the earthquake.

Compared to this, the debt-GDP ratio created a scare in the fiscal year 2001-02 when it was a staggering 69.7 per cent and had the country all worried. After this the nation has been trying to reduce its domestic and external borrowings to cover the needed public costs with some success as the repayments of the loans these days are being made on time. This indicates that there is some sort of good fiscal discipline making the macro economy more stable. However, higher consumption as a percentage of the GDP is a cause for concern, as although the consumption was lower in the last four years, this fiscal year it is still at an alarming 88.6 per cent. This would not have mattered if more goods were manufactured in the country. But Nepal relies very heavily on imports to meet its basic, industrial, as well as luxurious needs, whereas the export base is shrinking fast vis-a-vis the imports, leading to ever-ballooning trade deficit.

It is estimated that for every rupee of exports, Nepal imports around Rs. 11.3 of goods. This import-ratio is indeed alarmingly high, and had it not been for the remittances coming into the country the economy would have been in deep crisis by now. The country’s present economy can carry imports for another 12.6 months. Remittances as the percentage of GDP this fiscal year was 27.7 per cent while in the last fiscal it stood at 28 per cent. The decrease is attributed to more reliance on the informal channels to send the money home. Furthermore, the remittances are mostly used for consumption, to pay the heavy import billls, but have not been productively used in any significant degree. This shows a problem area that needs to be corrected without delay. In any case, it would not be wise to rely on remittances alone to sustain the country’s economy. Also important to note is that the trade deficit as percentage of GDP this fiscal year has increased to 33.4 per cent compared to 32.1 per cent last year.

Too weak
Our education authorities are weak. They cannot implement even the various laws and regulations governing the private schools. The latest example is the directive to the private schools, whose representatives were also reported to agree, that they must charge only 50 per cent on all the dues for the month of Baisakh, because of a prolonged period of closure after the major earthquake of April 25. This has been defied by almost all the private schools. When some parents were reported to raise the issue with the school operators, they refused to comply with the directive outright.

Before the earthquake, the private schools’ decision to raise the academic charges by about one-third, some going even beyond and others falling short somewhat, was something that the education ministry had not approved. The various student unions had threatened to start agitation against this arbitrary move. However, they had agreed to the formation of a committee to review the matter and to the implementation of its recommendations. But the educational officials are keeping mum.

A version of this article appears in print on July 14, 2015 of The Himalayan Times.

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