Nepal too is likely to feel the effects of the UK’s decision to get out of the European Union, known as Brexit. But what kinds of effects exactly? Though a lot is being debated, we simply do not know, at least right now or even in the coming 3-6 months.
In fact, the reason why the whole world is feeling the jitters with the outcome of the UK’s June 23 referendum is because it has created global uncertainty, not only economically but also politically and socially. Some fear that more countries will start to leave the EU. Also feared is the renewed call for independence from the UK by Scotland. Such events, if they really happen, will destabilize the world political order.
It is also likely to unsettle the world economic order as well. It has already started weakening the Pound Sterling and the Euro and strengthening the US Dollar and Japanese Yen, so much so that, Japan’s government may have to intervene in the currency market as its central bank has already exhausted its monetary policy arsenal and the policy rates are negative. This may trigger a global currency war which the International Monetary Fund may find very hard to control. The existing global currency system may also need some changes. But what sorts of changes, nobody can say for certain, at least for now or even in the coming months.
And a lot will depend on how the Brexit process is negotiated over the next two years or so once the UK triggers the so called Article 50 of the Lisbon Treaty beginning the process of withdrawal from the EU.
In short, the effects of Brexit are likely to be more widespread and serious than the effects of the 2008 global financial crisis.
Without a doubt, the fallout will reach Nepal as well. And Nepal needs to be prepared. But how?
Given the scale of uncertainty, there can be no definite answer to this. We have to wait and see. However, we need not remain passive watchers.
One possible strategy would be to form a pool of experts with a two year tenure or so assigned with the initial task of listing all the possible outcomes that may unfold across the two years that the Brexit process is expected to spread. For each potential alternate course of events, there should be an appropriate strategy framework planned. This will prepare a basis on which the actual steps to be taken will be decided depending upon the actual turn of events.
The government should make this document public so that a wider debate can be held. Then, this team will have to monitor the developments continuously. And whenever any important event takes place, another focused discussion should be held immediately leading to any necessary course of action.
Experience shows that Nepali policymakers have a tendency to hastily imitate the decisions made by certain foreign countries without properly analyzing the country’s unique situation and thus end up making a wrong decision. The suggested approach may help in mitigating this risk.