Finding Alternatives to Save the Economy

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Finding Alternatives to Save the Economy

The spike in coronavirus cases and the prohibitory orders issued by district administration offices in many districts paralysing over half the country has pushed the already crippled Nepali economy to the brink. Given the current situation, getting out from this slump will indeed be a herculean task. However, the government’s response to the public health crisis and economic slowdown caused by it has been tepid at best.

The four-month long lockdown and the current restrictions have not broken the chain of coronavirus infections but have further damaged an already weakened economy. The daily numbers of Covid-19 cases across the country published by the Ministry of Health is indicative to this. It is clear that the government did not evaluate and identify the achievements and weaknesses in its response to the ongoing public health emergency. Nor has it consulted with experts in a sector-wise manner and analysed facts and figures to extend the restrictions on the movement of people and economic activities. Such actions would have been important to chart plans for the upcoming days, identify infected people and bring the transmission under control. Had the government worked this way, it could have garnered the trust and support of the general public in these difficult times. But, the ineptness of the government and its failure to identify the real situation has led to widespread despair among the citizens with the country’s economy taking enormous damage which will take a long time to recover.

Ironically, the economic implications of the prohibitory orders were completely ignored while announcing such restrictive measures. As a result, the total industrial output has decreased to less than 25 percent, along with a complete disruption in the country’s domestic and international trade and commerce, closure of micro, small and medium enterprises (MSMEs) in large numbers, unemployment rising to unimaginable levels and diminished purchasing power of general consumers ultimately threatening the economic gains Nepal has made over the last few years after years of sluggishness.  

While it can be agreed that the response to public health emergencies like the Covid-19 pandemic come with economic compromises, there are ways to minimise the damage. The government should have seriously done a cost and benefit analysis before taking any restraining steps in order to keep people safe. Many countries worse affected by the crisis have done so, to keep the wheels of the economy running in a bid to reduce the impacts and achieve faster recovery. In South Asia, Pakistan and Bangladesh, for instance, realised this earlier and acted accordingly which has helped them to effectively face the economic, social and public health related challenges. Neighbouring India, which is currently recording the highest number of Covid-19 cases in the world, has also acknowledged that lockdowns only cannot control the spread of the deadly pathogen and stopping economic activities will prove more hazardous later.  

In the last six months of the Covid-19 crisis, a small group has made a windfall while others have lost to a big extent. Now the government needs to formulate a strategy considering this situation to find the ‘Pareto Optimality’. Steps should be taken by balancing all aspects including public health, economy, education and social life. The modality of restrictions needs to be based on these factors which will help to lessen the impacts. The current need is to open up the economy, boost aggregate demand in the market and bring the situation back to normalcy treading with a high-level of caution to avoid the coronavirus transmission from getting worse. The announcements made in the Federal Budget for FY2020/21 have not proven instrumental for economic recovery and the current fiscal year’s Monetary Policy, while incorporating several encouraging provisions, also has its own limitations. Therefore, the government needs to come up with additional packages to overcome the previous shortcomings to stop further economic derailment addressing the public health emergency.

Madan Lamsal
[email protected]

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