Nepali Economics

By Prajwal Shrestha Nepali economy is downgrading due to government negligence. The country’s economy is also similar to an individual's economy. One should not try to exceed expenditure above the income. An individual’s income should meet the expenditure plus future savings. Similarly, talking about the nation’s economy, the governments should not increase the limit of expenditure than the income that the country is receiving. When the country spends more budget than the income, certainly, it should borrow or lend the deficit amount from others. Nepal is practising the very mistake that without a worry, the country is spending more than the revenue she can generate. We have adopted an expensive political system under which, we are paying regular salaries to thousands of political representatives. In other words, the present system has been introduced to give employment to the political cadres. Therefore, within four years of functioning of the present political system, the government's debt burden has been skyrocketed and it has become double the debt amount that was recorded four years ago. In the meantime, our foreign trade is continuously facing a deficit and the trend of increasing trade deficit has already reached an alarming level. Moreover, the country is facing a negative balance of payment as well. This indicates a decline in the reserve of the foreign currency, which we need to import goods from foreign countries. On the one hand, we are unable to end the trade deficit, on the other, our foreign currency reserve has also been declined. The Nepal Rastra Bank, the central bank of the country, has already started to control providing foreign currency to those who are visiting foreign countries. It means the foreign currency reserve has been declined at an alarming level. If we don’t care about declining foreign currency reserves, the nation should take foreign debt to meet the country’s imports. The international price of the petro-products has been skyrocketed. As our dependency on petro-products is increasing rapidly, we are spending a large amount of foreign currency for the import of petro-products. If we had invested in the hydropower projects, we could reduce imports of petro-products by supplying electricity to the industries. Today, water that could be used for hydropower generation is going to waste and we are under the debt trap. If we follow blindly the advice of the foreigners or say rich countries, it is obvious to face the economic crisis by the poor countries. The entire global system is based on business. Rich countries want to continue their economic dominance by exporting their goods to poor countries. When China has emerged as the second-largest economy in the globe, it was out of expectation of the rich countries. Now, when China is heading towards the path of becoming the number one economy, those countries which had established their economic empire, are trying to encircle China and create different problems for China. The present trade war between China and the USA is gradually converting into a cold war. The American plan of the Indo-Pacific Strategy is aimed at encircling China. Americans want to drag China into a war to stop China’s dominance in the global economy. Such developments around the globe are the lessons to learn for Nepal like countries. This is a very crucial time for Nepal for initiating her foreign policy at a time when global polarization has started, more seriously, we are in between two huge nations India and China and both the countries are engaged in a face-off position. India seems to join the American block challenging China for a war. In such a situation, Nepal should initiate a very balanced foreign policy by keeping relations intact with both the giant countries. It seems China is not happy with the performance of the leaders in the government. We can speculate China’s displeasure from stopping our exports to China and regulating the supply of the Chinese products from the land route – Tatopani and Rasuwagari. The reason the Chinese side has given is that they are alert to the transmission of the Covid-19 virus, therefore, they have closed the border with Nepal and regulated the movement of the vehicles carrying goods. Meanwhile, the Nepali leaders in the government have not given priority to resuming the land route trade with China, rather, they have decided to rely on India for the entire supplies in the country. Remembering China during the difficult times only is a selfish policy. If we keep operative our border with China, India can never imagine imposing another economic blockade on Nepal. The Nepali leaders are committing a mistake, which is very serious. Likewise, this is not the first time since we are facing a negative balance of payment. We have relied on tourism and remittance as the major source of foreign currency earnings. Tourism cannot be flourished unless we develop the market for domestic tourism. Otherwise, different factors may affect foreigners’ visits time and again. Remittance revenue cannot be a permanent source for earning foreign currency. We are apprising Kulman Ghishing for ending hours long load-shedding but the fact is that we are importing electricity from India by paying dollars. We are talking about exporting our surplus electricity to India at a very cheap tariff. This strategy is also a mistake. India is the only buyer for Nepal’s electricity. Therefore, India will impose its monopoly and buy electricity at a cheap price. Therefore, instead of exporting electricity, the government should develop a strategy for supplying electricity to the industries at a low price so that our industries should be able to supply their products in the international market at a low price. For reducing the consumption of the petro-products also, Nepal should use more electricity by substituting the consumption of petro-products. Moreover, the country should immediately scrap the present expensive political system without any delay. Also, the government should think about strengthening our economy before it will become too late.