Nepalese economy: After the earthquake and blockade
NRA, the apex body formed to lead post-earthquake reconstruction and rehabilitation works, has used only 9.34 per cent of the budget in the first nine months of the current fiscal year which signifies massive under-utilization of funds
Subsequent to the so called “People’s War”, Nepal entered its post-conflict period.
This period is noted for its marked political changes featured by the intolerably prolonged period taken for drafting a new constitution and the November 13th elections ushering the country into a lazy pattern of secular federal democratic republic.
The State continues with its struggle in institutionalizing the drastic changes, a task that is not as easy as made out to be, already imposing a heavy toll on the lives of the Nepalese citizenry.
Two months after a devastating 7.8 magnitude earthquake struck Nepal on 25th April, a Post Disaster Need Assessment (PDNA) Report stated that the earthquake lowered GDP growth by over 1.5 per cent from an estimated 4.6 per cent in a no earthquake scenario in FY 2015-16.
The Report also shows that the income distress from the earthquake was likely to push an additional 700,000-900,000 people below the poverty line.
Again after a short while an indefinite strike was launched in the border area derailing the already weakened economy. The overall trade has shrunk by Rs127.83 billion in the first five months (mid-July to mid-December) of the current fiscal year due to the border blockade.
Import has dropped by 36 per cent and export by 30.7 per cent as compared to the corresponding period of the last fiscal year.
Import and export from the major trading partner India decelerated profoundly and imports stood at Rs119.15 billion. The country’s import-based revenue was affected excessively.
Economic prospects for the country seemed to be getting bleaker, as the World Bank revised the growth for fiscal year 2015-16 down to 1.7 per cent, versus an estimate of 3.7 per cent prior to the trade disruption. The IMF’s latest forecast is 2 per cent and the Asian Development Bank’s projection is 1.5 per cent.
But according to the Central Bank economic growth could be contracted to -0.99 per cent in the current fiscal year. The contribution of agriculture sector to GDP will be 31 per cent according to an IMF report. The country’s treasury surplus recently surpassed Rs 200 billion according to financial management policy analysis division, Ministry of Finance.
From the above figures, it is obvious that the country’s economy is in a highly vulnerable situation and, therefore, the country first of all should go for immediate relief of the people. Hand in hand it should go steadily for rectifying the chaotic economy of the country.
Rationally, instead of going for long term development, short term immediate relief should be provided to the people for their sustainability and existence at this point of time.
The National Reconstruction Authority (NRA), the apex body formed to lead post-earthquake reconstruction and rehabilitation works, has used only 9.34 per cent of the budget in the first nine months of the current fiscal year which signifies massive under-utilization of funds.
Under these circumstances post-quake reconstruction and rehabilitation works should take place at the earliest on a war footing. If the construction gets delayed the cost will also go up and have a multiplier effect upon the people with the monsoon already here. The delay is a matter of concern despite the availability of resources.
The Government has declared low interest loans for the destitute whose houses have been completely or fractionally damaged. But for this purpose the Government should act with a boot strap operation immediately, either to provide funds before the onslaught of the monsoon.
People are already building their houses due to the rainy season in some of the areas. There is advantage also if the money is poured in the construction and the unspent capital expenditure is mobilized as it will generate income activities of the people and at the same time expedite economic growth.
Destruction has set the economy back by a decade in addition to shattering the effort to move from a “Least developed Country” to a Developing Country” by 2022. Highways and roads have suffered major structural damage; similarly several hydro-power infrastructures have been impacted.
Currently, NEA is supplying 564 MW including 210 MW imported from India. As a result of this, manufacturing sector is severely affected with rising fuel costs to meet energy requirement.
For this purpose, the damage to both hydro-power and roads has to be revamped as soon as possible.
Nepal should go all out in tapping economic benefits that can accrue from the northern and southern economic giants with trade diversification in the larger interest of the country.
It is obvious that it is in the country’s immediate interest to unbundle the monopoly of the state owned Nepal Oil Corporation and prepare the ground work for the entry of other competent fuel/gas suppliers in the Nepalese market.
It is totally baffling why people continue to experience shortages even months after restoration of full supply across the border. It simply points out to one thing and that is the prevalence of a deep seated black marketing nexus.
It is obvious that there is a severe dearth of empathy and pain sharing on the part of political stakeholders and decision makers and unless this is genuinely reversed, political rhetoric will always remain the primary consumptive fodder for the wanting Nepalese to feed on: indeed a sorry state of affairs.