The US economy occupies almost one third of the global economy. The financial crisis which erupted from mortgage lenders like Fannie Mae, Freddie Mac and investment banks like Lehman Brothers, Merrill Lynch triggered a wave of financial crisis around the globe including Loylds Bank, Royal Bank of Scotland, USB of Switzerland. Great economies of the world are al

ready engulfed in this vicious circle of crisis.

Foreign direct investments are being withdrawn by developed nations to save their own economy. Many countries like Hungary, the Baltic States, and South Africa, are in trouble because of their large external debts. Russia came to rescue Iceland from being bankrupt with its 5.8 billion dollar package. The governments of these countries, in their various rescue efforts, have used various tools like guaranteeing deposits in order to increase public confidence; some have injected capital directly; South Korea has offered a state guarantee on banks’ foreign debts. Nevertheless, recently nineteen banks in the United States alone filed for liquidation.

But Nepali banks have experienced a certain degree of decline in foreign remittances already. Manpower companies have admitted that the demand for Nepali labourers has declined considerably in the international market, especially in Malaysia and the Gulf, which are major importers of our cheap labour force. It is likely that it will hit the tourism sector as well because developed countries are facing a major unemployment problem. It will injure the export oriented businesses like garment and carpet because their major markets are the US and Germany. The crisis is also likely to affect the metal, steel, plastic and vegetable ghee industries and some may even disappear from the market permanently. Others are concerned about foreign donors who are reeling under their own financial crisis and have expressed doubts that they will be able to fulfil their commitments on grants and assistance.

But there are some people who see the entire things the other way round and who are extremely positive on what has happened in the world. These people see the global crisis in their favour from all angles. They believe it will have no effect on remittance business because most of the people working in the Gulf are employed in construction businesses that do not depend on FDI of European or American countries. Hence, Nepalis are unlikely to lose their jobs there. Neither will it affect tourism industry in Nepal as only the budgeted tourists visit our country.

Similarly some optimists are there who believe that the capital flight that took place earlier will begin to repatriate due to the better returns in our own country. In the international context, the Nepali economy is a sick economy and we have survived and thrived in this sick environment. So, it is unlikely that the global crisis may have major impact on our economy and we will certainly survive the global crisis, though the growth rate may not be as projected by the government.