In a double bind
Though some economic analysts and the government had ruled out, not long ago, any significant impact of the global recession on Nepal, its adverse influence is now being gradually felt, including the financial sector. The assessment of no significant impact was based on the argument that the Nepali economy is not yet fully integrated with the world economy. But Nepal is not an island, either. Its development projects and programmes, funding for them, and its sources of foreign exchange, for instance, depend mainly on foreigners. The remittances sent by Nepali workers abroad, which work out to a sizable chunk of the country’s gross domestic product, are showing clear signs of sliding because of the recession abroad which has started costing Nepali workers their jobs. The steep decline in the international price of oil, now roughly one-fourth of its all-time-high level at about US$150 per barrel just several months ago, is hitting oil-exporting Middle Eastern countries hard, with its obvious economic consequences for Nepal, as it is to the Gulf countries that most foreign-bound Nepali workers have gone to.
But even more worrying has been the long hours of load-shedding, now totalling twelve hours daily, which could well go up to sixteen. Apart from the extreme inconveniences caused by it to the people, its economic impact is bound to be huge to push government programmes and targets off balance. Every area of life has been touched, all the more so in the urban areas and where electricity connections exist. The Nepali economy that still bears the ugly marks of the decade-long domestic conflict is coming under increasing strains from acute power shortages. The effects are so across the board and so pervasive that every sector is suffering, including the media, communication, education and health sectors. For instance, as a result, factories have started cutting back on their production, and some of them are reported to have even halted it. According to FNCCI, most industries have slashed their output by more than half. Since a dramatic change for the better in the power sector is extremely unlikely within months, things may turn worse instead.
Though the government has moved to reduce the effects of outage on the factories situated in industrial estates by installing separate feeder lines, this will not, however, relieve many industries that remain outside. Garment, carpet, pashmina, cement and iron rod industries are some of the many important ones that face trying times. And tourism industry, a major foreign exchange-earner, needless to say, has lost any hope of recovery. Who will come to Nepal as tourists, or as investors, with such terrible power outage, even assuming other things to be satisfactory? The Maoist-led government’s annual programmes and projects, as well as its growth and other targets, are unlikely to be met because of extended power outage, which is, admittedly, not the making of the new government. But this should necessitate a downward revision of growth targets. The government is not in a position to reverse both power outage and the effects of international recession. But it needs to do enough homework and come up with sound policy measures to minimise the worst effects.