National Economy In Doldrums
The main agendas of the present government are political stability and economic prosperity. There is a high chance of the country attaining political stability as the left alliance government is in power and the CPN-UML and the CPN-Maoist Centre have agreed in principle to unify their parties. The left unification will happen sooner or later. The present government is, therefore, expected to last its full term.
However, the agenda of economic prosperity seems to be out of the question given the present condition of the economy unless far-reaching reforms are made. The trade deficit is rising, the balance of payments (BOP) situation is negative, imports are exceeding exports in great measure, remittance inflows are declining, corruption and other irregularities are rising and more importantly, the state coffers are almost empty. All this indicates that the economy is in the doldrums.
As soon as the present government was installed and Yubaraj Khatiwada was inducted into the Council of Ministers as Finance Minister, hopes ran high that the economy of the country would witness transformations. But things have not turned out well in this direction; rather, some bleak economic indicators have cropped up. For example, the share market has been on the decline since the Finance Minister opined that the share market, especially the secondary market, was an unproductive sector. Players in the share market have now shown serious concerns that their investments will go down the plug hole. The Finance Minister has tried to defend the plummeting share market by reasoning that such a downward trend is but natural. But the investors are not ready to buy the argument.
In the meantime, the government came up with a white paper on the economy of the country the other day. It was issued as there has been a drastic change in governance to a federal system. The white paper has painted a bleak economy obtaining in the country. The most alarming aspect seems to be the fact the state coffers are almost empty. This has generated serious questions about fiscal discipline.
As pointed out in the white paper, there is fiscal anarchy in the country. Political parties tend to drain the state coffers haphazardly in the name of medical treatment or financial assistance or some other purpose. Such money is distributed mostly among political leaders and cadres. The Deuba-led government was alleged for distributing money from the state coffers among its leaders and cadres during its dying days in office. As a matter of fact, every government has misused the state coffers under the spoils system. Such a trend is dangerous and must be nipped in the bud so as to stop the state coffers from being exploited haphazardly.
The Finance Minister has also set the policy of privatisation at defiance, blaming the policy, inter alia, for the anomalies seen in the economy. The policy of open-market economy and liberalisation has been in place since the advent of a multi-party democracy in the country in the 1990s. What should be kept in mind that barring a few, most of the government entities are in a sorry state. On the other hand, the private sector is making progress, thus contributing to the economy. It would be out of the question to nationalise the private sector at the moment. In our country, the policy of privatisation was adopted to improve the economy as the government sector alone could not do so. Now, the concept of public-private partnership has emerged.
The white paper has pointed out myriad problems in the economy but plausible solutions are there. However, the government is also coming up with the first federal budget by the last week of May, 2018 and relevant programmes and policies. As the Finance Minister is well-versed in the economy of the country due to his experience with working as Vice-Chairman of the National Planning Commission and the Governor of Nepal Rastra Bank, the upcoming budget and the government’s policies and programmes are expected to incorporate reform measures for the improvement of the ailing economy.
The Finance Minister is in favour of investments in productive sectors, such as agriculture, tourism and hydropower. The share of investments in such sectors is growing, which is a positive indicator for the economy. Inward remittances are one of the pillars of the economy. However, remittance money has been on the decline for the last few months due to problems in destination countries, like Qatar and Malaysia. It is, however, reported that remittance funds are diverted to the unproductive sector, like social obligations, purchase of property and consumption. Still, remittances are supportive of the economy and their dwindling inflows have worried the country.
In view of the dreary economy, it is high time the government did something to revive the economy. As the county is import-dependent even for small things, domestic production needs to be accelerated. The country was once an exporter of food grain. Now, the country tends to import almost everything. So import-substitution needs to be resorted to by gradually decreasing imports. For this, agriculture needs to be prioritised on an unprecedented scale. It need not be reiterated that the country is very favourable from an agrarian point of view. Still, the country seems to prefer human settlements to agriculture. When Israel can make headway in agriculture despite having an agriculture-hostile environment, there is no question of the country not being able to revive its past agricultural glory. Similarly, the county needs to emphasise industrialisation. The raw materials can be managed to a great extent from internal resources. The state of de-industrialisation seen in the country needs to be halted.
The other factors are development of hydropower and tourism. The hydropower sector is now showing signs of improvement with several hydropower projects being implemented or in the process of being implemented. With regard to the tourism sector, infrastructure development is required. There are several touristic spots in the country but lack of infrastructure like roads and accommodation facilities is hampering the development of the tourism sector to the desired extent. Just announcing the target without paying heed to the basic infrastructure will not work at all.
Attracting foreign investments is equally crucial to make the economy better. An investment-friendly environment is required to lure not only foreign investments but also domestic investments. Peace, security and political stability are a sine qua non for creating a conducive investment ambience.
Further, controlling fiscal anarchy and growing corruption is a must. As stated in the white paper, waiving huge amounts of money running into billions of rupees in the name of amicable tax settlement is not desirable. It is obviously a form of fiscal anarchy. The white paper has, in a sense, given guidelines on how to improve the economy of the country that is sliding day by day. The government should, therefore, adopt strong measures to improve the economy. After all, the country cannot graduate to the status of developing country by 2022 without improving its economy.