The abrupt dissolution of the House of Representatives and announcement of mid-term elections has pushed the country into a state of deepening political uncertainty. While political parties and members of the civil society are opposing the move of the Prime Minister KP Sharma Oli and making their positions clear as the crisis unfolds, the business community so far has remained patient during these unsettling times. The three major bodies of the private sector- Federation of Nepalese Chambers of Commerce of Industry (FNCCI), Confederation of Nepalese Industries (CNI) and Nepal Chamber of Commerce (NCC), have published a joint statement expressing their concerns over the political turmoil. Similarly, the stock market has remained aloof from the ongoing crisis. After staying suppressed for nearly a year, the investment demand has also risen in the country as indicated by the increasing bank credit in the recent days. Nevertheless, the political upheaval has cast more dark clouds of uncertainty over the country's economy.
The promulgation of the federal constitution in 2015 and the historic 2017 elections had given a sense of belief that the country had entered an era of political stability. People started to trust the words of politicians that their focus will be on economic development. After 2015, as consecutive governments initiated legal reforms and political stability was achieved to an extent, some promising signs also emerged. Investments in different sectors started to grow, sluggishness in infrastructure development eased and youth and women entrepreneurship began to rise. However, the Covid-19 pandemic has seriously dented the gains made over the last few years.
The global health emergency has hammered Nepal’s economy in several ways. A large number of businesses across the country have closed and countless jobs have been lost in the past one year. Sectors such as tourism, transportation and entertainment have been decimated. Except those producing essential goods, most of the industries are running far below their production capacity. Even sectors like trade and commerce, that were considered relatively risk-averse to economic slowdowns, are also reeling with several problems particularly due to disruptions in supply chains and low demand in the market. Further, the intensifying political crisis has added problems to the already shattered economy. More than Covid-19, it is the political instability that poses grave risks to the fragile economic recovery.
The unfolding of the latest political drama has sent a message that Nepalis should brace for protracted instability like in the past. In this respect, past experiences should be taken into account to face the challenges that may arise due to the political crisis. For over two decades starting from the early 2000s, the country’s economic development was the biggest victim of the political stalemate.
The experiences of other countries could also be useful in our context. Over the years, it has been seen that many countries in Asia, Africa and South America have been successful in attaining higher economic growth weathering their political wrangles. The spectacular growth of Bangladesh can be considered as one of the best examples in this regard. Over the past two decades, the South Asian nation was able to safeguard its economic ambitions against the persistently unstable government.
Hence, the Nepali business community, political leadership, bureaucracy as well as civil society need to be aware that the economy does not suffer from the fallout of the political crisis. The private sector bodies need to send a strong message to the political leadership to avoid casting a shadow of uncertainty over the economy already battered by the Covid-19 pandemic. Before getting into talks with the political leaders, they need to come together and do proper homework so that political leaders pay heed to the demands and suggestions seriously.