Commentary

By P.R. Pradhan The country’s economic indicators are not moving in a positive direction. Nepal’s imports have been inclined by 64 per cent in the last three months, whereas, exports are nominal. The trade deficit in the past three months is 4 trillion 13 billion 470 million rupees, which is alarming. The country is facing a negative balance of payments (BOP) with the capacity of foreign currency reserve just for 7 or 8 months. The serious part is that the remittance revenue has declined compared to the last year’s revenue. Hike on petroleum products in the international market is going to contribute further to intensifying the trade deficit gap and further pressure on foreign currency reserves as the country has been highly dependent on petroleum products. Along with an incline on petroleum products tariff, it will contribute to inflation in the market as transportation cost of goods will also incline. As the government is unable to meet the capital expenditure target, there has been seen a cash crunch in the market and banks are unable to provide loans. The government’s domestic and foreign debt has inclined enormously. It has already scored 17 trillion 29 billion rupees, which is equal to our gross domestic product. If we cross the limit or say borrow money than the GDP, it will be an alarm for the economy. The donor countries may not trust us for providing further debt higher than the GDP rate. Considering the present trend of the domestic revenue, it will be difficult for Nepal to pay back the principal amount and interests of the foreign loans. If the country is spending foreign loans on the general sector or say non-productive sector, it is more alarming. The government is taking the foreign loan for managing the fund for the federal structure, which is a wrong economic policy. If loans are taken for infrastructural development, it is acceptable but a foreign loan for the non-productive sector is a negative indicator of the economy. There is the need to reduce imports but the country cannot reduce the import of petroleum products. Accordingly, if imports are curtailed, it will directly impact the nation’s revenue. Already, the nation has fallen into an economic trap, which may lead the country.