Two recent reports, published by the World Bank and International Labour Organization (ILO) separately, have clearly indicated the deepening economic crisis in Nepal due to the Covid-19 pandemic. The reports, related to Nepal’s economic growth and job market, have highlighted the urgent need for a major transformative policy.
While the government claimed that the country’s economic growth will be 2.3 percent in the current fiscal year amidst the crisis, the World Bank report has forecast the growth rate to be much lower at 1.8 percent. Nevertheless, it will be encouraging if the country can retain a positive growth rate, as forecast by the government and the World Bank, at a time when the growth rate of many other South Asian economies is expected to be negative.
Evaluating the current economic headwinds, it is highly unlikely that the growth target set by the government will be met. Looking at the bleak indicators, it is not hard to imagine the economic upheavals Nepal will have to face in the coming days. Be it manufacturing, agriculture, services, banking and finance, retail, construction or international trade, no sector of the economy has been left unscathed by the wrath unleashed by the global health emergency.The virtual collapse of the tourism industry, sharp decline in imports of industrial raw materials and capital goods, and the threat to the survival of micro, small and medium enterprises (MSMEs) are some of the impacts of theCovid-19 crisis. Moreover, the crisis has threatened the inflow of remittance which has been the lifeblood of the Nepali economy helping a large number of people to come out of poverty and keeping the country’s trade deficit in check for the last two decades.
Making the situation worse, a steep decline in revenue has forced the government itself into an economic quagmire; the Finance Minister himself has admitted in parliament that the government is running out of cash to finance mandatory liabilities including the salary and allowances to civil servants and security personnel, social security allowances, principal and interest payment of foreign loans, among others. On top of this, the socio-economic fallout of the Covid-19 crisis is becoming terrifying as indicated by the suicides committed by more than 1,100 Nepalis during the lockdown.
Taking the economy out of a slump of this magnitude indeed requires extraordinary yet considerate efforts. But looking at more than months record, the government’s response has been tepid and ineffective. From the announcement of the lockdown that crippled economic activities and the lives of ordinary citizens to the easing of restrictions, the handling of the situation has been chaotic at best which has fueled a sense of despair and anger among the citizens.
It is an irony in that people in the government wasted the lockdown days in futile acts like dirty political games, shadowy medical deals and making unproven and meaningless claims that ‘Nepalis have high immunity power to fight Covid-19’. Despite spending billions of rupees, sluggishness in testing, tracking and tracing (TTT) of coronavirus, significant delays in rescue and repatriation of Nepalis stuck abroad including those in India and an inability to manage quarantine facilities have only allowed the virus to spread fast across the country. The lockdown has been a complete failure and Nepal only suffered economically to a great extent due to the restrictions.
The easing of restrictions over the movement of people and opening of businesses is certainly a welcome move. But given the severity of the situation, these steps only won’t be sufficient to take the economy out of the deep slump. The government needs to take the private sector into confidence for the economic recovery. Paying attention to the concerns of business community members and playing an active role to resolve their issues will change things for the better in the present moment and will, to some extent, help the country face the current crisis.