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Economy in the lurch!
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Prem Kumari Pant
At present it has become a very common state policy of obtaining loans from other countries and multi-lateral agencies and also from internal resources through circulation of debenture of loans.
Revenue generated from the public is the main source of income for the government. Receiving of dividend from public enterprises, grants, issue of money and national debt are the basic sources of public revenue. National debt is basically the instrument of fiscal policy. The government adopts this policy to bridge the gap for deficit, financing, maintain equitable distribution of resources, repay the debt and to meet contingent expenses. Government cannot raise national debt without seeking the approval of the parliament. The government should follow certain legal provisions, rules and regulations for collection of public debt. Actually national debt is not desirable and it has negative effect over economy if government raises it. The debt is desirable only if it is invested in productive purposes and nothing more.
The constraints of foreign loans have created quite complicated and burdensome problems for the poor nations that are marching along the line of planned economy, although they are not deriving the desired fruits from the same. Developing countries are so badly pressed under the burden of foreign loans that even the amount of interest payable on the principal amount itself has become bigger than what their whole income amounts to. The tragedy has been assuming still graver dimensions because of the mounting burden of these loans almost every year.
If we analyze the situation in Nepal, she has been paying the principal and interest of past debt continuously. The government has plan to pay Rs. 19.01 billion (6.65 %) of total budget this year to foreign donors.
The government, on the other hand, borrows money from internal sources and pays heavy amount for repayment of interest and principal on another. All these activities only add up to the burden of public debt. Nepal\'s internal debt has crossed over Rs. 120 billion.
Nepal is one of the world\'s least developed countries. Although the public borrowings are aimed at development purposes, they have been directed towards unproductive sectors and purposes in reality. National debt is required to increase productive capacity of the nation. This kind of loan is desirable for mobilization of internal resources, to promote savings, to meet deficit financing, among others. But this seems to be only to follow the tradition and meet contingent expenditures. The burden of public debt is increasing every year. Generally, when any country would default on payment, cannot repay debt according to contract schedule or should raise debt for debt repayment then it is going to be debt trapped. Due to the problems like long-term repayment schedule, misdirection of debt, devaluation of Nepalese currency in terms of dollar interest, cost of external debt has also been mounting. If national development and growth of the economy as projected by the plan is easily attained this amount is not a big problem. Contrary to this, if the problem of the economy including political problem remains as it is, the burden of public debt will be matter of headache and nation may lose her credibility.
Alarmingly, recurrent expenditure has been going up in recent years. This happened due to a lack of proper financial system in the conflict-hit economy. Donors are concerned that external assistance is being siphoned-off to no-development sector, which demands that the system of service delivery have to be thought again.
When we try to discuss the rapidly deteriorating economic condition of the country our minds get stuck to one very prominent factor which can most appropriately be regarded as the main cause of this painful situation. It is the lack of political will to face the problem.
It would be wrong to presume that we so badly lack in means and resources, which can bring about healthy readjustment in the situation. Our resources are enormous and so is the case with means. But misuse of the same has reached such a stage that they are appearing to be only inadequate to meet the challenges.
There is, of course, no denying the fact that Nepal has been obtaining considerable amount of assistance from various friendly countries and international donor agencies in its lofty task of national development. But the point is to what extent these assistances, loans and grants have been utilized on the implementation of development tasks and what portion of the aid is being utilized on the maintenance of the advisors and technicians provided to us from the donor countries. The statistic complied with regard to these aids clearly reveals that a huge portion of these aids has been spent on meeting different expenditures of the foreign advisers and technicians. The difficulty on the part of Nepal is that it cannot object to these practices only because of it being the beneficiary country.
There may not have been much economic miracles in the rest of the country but the improvement in the living standards of the ruling political class have been breath taking.
The scarcities and market prices have both played havoc with the government doing nothing except in consolidation and aggrandizing the personal prerogatives, perks and economic gains without caring even the least for those in whose name they are enjoying the bumper crops of democracy. Political parties leaders must put their right hand in their heart and ask themselves the question whether their tactics are going to serve any cause of the country and people. But the tragedy is that while loans and aids have been flooding on the country, the return is almost zero.
Economic growth rate is an ultimate calibrator of the overall economic performance of a country. It is highly intertwined with the existing level of macroeconomic infrastructures such as employment, productivity, technology, prudent financial system and so forth. Sustained development of such infrastructures is essential in pursuing and accelerating the growth rate; however, it needs considerable amount of time, patience and energy coupled with the strongest unified determination of all concerned sectors including governing and opposition political parties, executing government and private industries.
Macroeconomic indicators of Nepal are currently reeling under the yoke of sustained political instability, energy crisis, frequent strikes and unfavourable weather conditions.
In the past five years, the average 2.14 percent GDP growth rate of Nepal has been well below 70 percent of South Asian average of 7.26 percent - the lowest among other South Asian countries. The highest GDP growth rate of 14.86 was secured by Afghanistan even during the conflict years especially due to flooding of foreign money. Another country which was too hit by insurgency-Sri Lanka, also maintained its average GDP growth rate of 5.7 percent.
GDP is used to measure total economic activity in a country and considered as a yardstick for measuring economic achievements. The indicator is highly related with the productivity outcome which, apart from other technical factors, is affected by social attitudes towards works, work ethics, unionization and perhaps most importantly, trainings.
It is important to remember that Nepal’s labour force, in most cases, not only lacks well qualified technical training but also is highly influenced by politics. This is not to argue that labour unions should refrain from ideological inclination; but, should rather be seriously considering the extraordinarily declined output of industrial performances due to series of protests, bandhs, chakka jams, strikes, extortions, abductions and so forth. Industrial performance guarantees job sustainability and employment growth. For an agrarian economy like Nepal where agriculture provides employment to about 76 percent of the 2.6 million population, it accounts for more than 32 percent of the GDP.
Nepal has historically been poor in equitable development of physical infrastructures including transportation and telecommunications that are essential for economy to grow rapidly; and, on top of that the decade long insurgency has virtually damaged a significant proportion of the existing ones. Sustained political instability has, time and again, shaken the business confidence of local businessmen and foreign investors are found reluctant to invest in Nepal. As a result, total unemployment rate in Nepal still stands at 12 percent. According to the latest Labour Force Survey 2008, the underemployment in urban area stands at 50 percent. However, the bigger trouble is the consumer price inflation, which is now hovering around 11 percent. Despite decrease in inflation to single digit for three months, it also went up to double digit for last two months. Earlier, the inflation had remained at double digit for continuous 15 months.
Remittances is , the money sent back home by the Nepalese abroad, contributing about 30 percent of their total earnings, is the primary source for most of the households. But, the recent decrease in the growth in remittance flow has caused havoc in the banking system leading to liquidity crunch. Their bad practice of excessive lending against deposits is also responsible for cash crunch facing the banking system. Even after the injection of Rs. 23 billion by Nepal Rastra Bank, the banks are still feeling hit and have failed to lend to the projects.
The country\'s trade deficit is rising alarming in the recent days with increased imports and decreased exports causing balance of payment deficit of Rs. 19 billion in first five months of the current fiscal year. There is no environment for booming exports. The export industries specially garment, carpet and others are facing numorous problems including lack of electricity, strikes and labour problems. Garment entrepreneurs say they are not risking taking order from the buyers due to uncertain situation at home for demanded garments.
The nation has been marching along the path of planned development for more than 53 years. Not withstanding this phenomenal record in the planned development sector our achievement are not at all commensurate with the huge investments made in the implementation of these plans. Rather on the country, the demand for foreign aid has continued to mount. The plans have been completed and the success thereof is judge on the basis of the assumption of the disbursement and spending of the full budget allocated for them. The result of this practice is that our dependence on other has continued to increase and the economic condition of the country also continued to deteriorate in a manner far out proportioning the development investments. It will not be any exaggeration to maintain that the number of those countrymen who were compelled to live below the subsistence level has now been increasing day by day.
The main need therefore is to bring about a basic change in the entire policy of implementation the economic growth programs. The major stress is to be laid on improving the indigenously available resources.
Political milieu of the country
Nepali people are literally eager to see the political parties working in unison to lay the groundwork for a peaceful and prosperous country.
To harbor yearning for a better future after being dismally disregarded for long is absolutely justifiable. Particularly after the restoration of democracy in 1990, the political parties ceaselessly deluded the poor denizens to quench their gluttonous appetite for power.
Thus, the post 1990 political scenario was fraught with the filthy competition amongst the major parties to brazenly bamboozle the country and its people to relish the luxuries of power. Top of all, the already despondent and suffered people had to reel under the yoke of bloody conflict for a decade.
However, the more or less successful accomplishment of historic event of the CA election has renewed the sabotaged hope of the people that the better days are waiting. But, unfortunately, the lack of a common and clear vision amongst the major parties about the country’s future political course is not a good omen.
The way the parties are behaving has given rise to a political uncertainty coupled with a constitutional crisis.
It appears apparent that every party is indulging in self-centric agendas and interests. The fear that the people’s aspirations for peace and prosperity might once again get ridiculed is looming large.
Barring aside the incongruence besetting the national politics, the country is faltering in the quagmire of economic problems.
With the export business at its lowest ebb, the trade deficit is just getting more vicious. Manufacturing industries are fast losing their competitive edge and the import volume is declining at an alarming rate.
The flow of business investment has taken a nosedive and the trend of Nepali youths going outside to seek menial jobs is accelerating.
In order to annul all these plights, the synergistic and collective endeavour of major political actors is mandatory. But, the same appears elusive, at least for now, with the prime parties diverting more energy and time towards the relatively petty issues.
Needless to reiterate, the country is now in dire need of coherent, compromising and concentrated tendency of political parties. The onset of any deep discord between the parties will only inimical to the entire endeavours aimed towards propelling the nation towards the path of sustainable peace and prosperity.
The vacuum of the sense of common goal and purpose amongst our political tycoons is the prime reason for a host of problems dogging the nation. Despite knowing the fact that the nation might face a big disaster if a new constitution is not drafted in a stipulated time frame, the political parties are still indulging themselves in dirty politics.
The sagginess of Nepali leaders to forge an understanding on any prickly issue unmasked the lack of their earnestness to proceed with constitution-drafting process in time.
If the chieftains of parties continue to worship power and position as their ultimate goal, the nation is sure to plunge into an irreversible disaster, forget about writing the new constitution before the May 2010 deadline.
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