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Economy getting more anemic
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WM correspondent
The country’s economy is in the doldrums. It appears that it is being sunk into am abysmal swamp.
It is quite obvious that export of manpower keeping the shaky and vulnerable economy afloat.
However, a tardy growth of remittances compounded with gargantuan exports in contrast to frail imports has resulted in ballooning balance of payment (BoP) deficit, depleting foreign currency reserve and liquidity crisis in the market.
The growth of remittances is forecasted to be at a feeble 10 per cent this fiscal year compared to 19.5 per cent of the GDP in 2008/09.
Malaysia and the Gulf, the prime absorbers of Nepali migrant workers, are receiving decelerating number of workforce.
The real GDP growth is expected to decelerate to three per cent in the current fiscal year due to poor monsoon, slowdown in remittance inflows and tighter monetary conditions
The trade deficit till the end of the month of Poush of the current fiscal year swelled by an alarming 58.4 percent (Rs 56.83 billion) compared to the same period of the previous year.
The import business has become six times bigger than the export trade.
Till the first six months of the current fiscal year, the value of the exports stood at a mere Rs 30.82 billion where as the same of the imports was a massive187 billion
Owing to ills like labour unrest, bandhs, strikes, excessive load shedding coupled with economically insensible political leadership is also wracking the entire income generating activities across the country.
Owing to ills like labour unrest, bandhs, strikes, excessive load shedding coupled with economically insensible political leadership is also wracking the entire income generating activities across the country.
According to Federation of Nepalese Chamber of Commerce and Industry (FNCCI), the acute power shortage has already made hundreds of medium-sized enterprises, running on low-profit margins, go bankrupt.
The energy crisis, with daily power cuts of up to 12 hours a day, is stifling almost every kind of commercial activity.
The industrial sector is going downhill at an accelerating pace by creating an alarming rise in job losses.
The current unemployment rate stands at over 10 percent with the shrink in the size of the job market.
If the joblessness continues to swell, it will only serve as a catalyst to further flame up anti-social activities. In the long run, it can covert into an uncontrollable social unrest.
The agriculture sector, the mainstay of Nepali economy, is estimated to be highly lackluster with the anticipated growth of a meager 1.12 percent. The figure is half of the annual population growth rate.
The sector has long been ill-equipped and relied on the blessings of Rain God.
Nepali peasants are forced to place their trust on erratic monsoon.
Paddy production, which accounts for 20 percent of agricultural production, has nosedived by over 11 percent due to this.
A majority of peasants rely on paddy production for income. So, the decline in its production directly affects their purchasing power, thus slowing down demand for goods and services in rural areas.
A majority of peasants rely on paddy production for income. So, the decline in its production directly affects their purchasing power, thus slowing down demand for goods and services in rural areas.
The augmentation of inflation to 11.8 percent by the end of first sixth months of the current fiscal year shows that lower strata of the population is having tough time to survive.
In fact, the consumer price-based inflation has constantly hovered around double digits for last two years.
The declining share market, rapidly rising lending rates and alarming balance of payment, excessive investment in non-productive avenue like gold and real estate is also casting blight on the already fragile economy.
The fluidity in the economy has also propped up a massive amount of capital flight.
Over Rs 15 billion has been transferred to India in the first five month of this fiscal year alone.
The private sector´s declining confidence on the economy is evidenced by the increasing volatility of the stock market and a declining number of new business enterprises.
Inflation flares up with higher price rise in food and beverage that rose by 18.1 percent mainly due to higher price rise in India.
The government is happy to boast that it collected 30 percent more revenue during the first half of current fiscal year from the import of luxury and consumer goods.
It seems oblivious of the need to develop import substitution strategies. If the collected revenue continues to finance regular expenditures, it will prove only disastrous to the economic function..
The only option to shield the economy from deepening crisis is active political engagement to address the poor business climate, power shortage, infrastructural needs, weak governance and difficult labour relations apart from political stability and improved security.
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