By Shankar Man Singh

Recently, it has been made public that the High-Level Economic Reforms Advisory Commission has submitted an interim report to the government. The chairman of the commission, Rameshwor Khanal, has submitted the interim report to Deputy Prime Minister and Finance Minister Bishnu Poudel.

The report states that urgent matters needed to be done to make the economy more dynamic and strong. There is no mention of whether there is a deadline for this as an action plan, it is not clear whether it is just a suggestion or an action plan. Who is the responsible body, why, how and when to do it, etc. It is not clear whether it will be the same as in the past and whether a special economic package or stimulus program is needed.

The interim report, among other things, includes paying government liabilities and other arrears, facilitating real problematic borrowers in the financial sector, enacting laws to regulate commercial lending, etc. These things are not new, since they are a continuation of the traditional things of the past, their effective and efficient implementation is necessary and mandatory. No one can doubt this.

Similarly, the interim report also suggests addressing the problems seen in problematic cooperatives, increasing capital expenditure during the remaining period of the current fiscal year, and accelerating the reconstruction of physical infrastructure damaged by disasters such as the Jajarkot earthquake.

If we look at the recent ordinance on cooperatives and the "modality" for increasing capital expenditure, it would have been better if it had been clear, otherwise, there is no doubt that this would be just a "wish list".

Since the private sector also participates in this committee, we can only speculate that something will happen.

Similarly, it is mentioned that the government has initiated land acquisition proceedings or accelerated the distribution of compensation for land whose process has been finalized, and further facilitation has been made for Indian tourists coming by land. This is seen as a major hurdle to completing any project on time.

It has also been suggested to prioritize the payment of completed construction work in the current fiscal year 2081/82 without entering into new contracts and to include new projects in the budget of the coming year only if the budget is available by fulfilling the obligations created by entering into multi-year contracts. If this is not done, it will be a “policy departure”.

In addition, it is important to consider the availability of resources based on the impact of the subsidies provided by the government in various sectors on production and employment and to review the interest subsidy program for concessional loans.

It has also been suggested to increase the premium of health insurance. In this context, it seems that the appropriate use of the Social Security Fund, age limit, pension issues and yes should be reviewed in a timely manner.

It is also relevant to emphasize yes with the government’s expenditure burden and the average active life expectancy of 73 years, and perhaps there is something mentioned about this in the new National Insurance Act.

The Commission has suggested that businesses that were in good shape before the COVID-19 pandemic are now in trouble but are in a state of improvement and that they should be given an opportunity to reschedule loans for a year.

Perhaps many banks should have done this process internally. If there is a circular or directive from the Nepal Rastra Bank itself, NPLs will decrease and profits will be higher in the capital market.

In the context of the sluggish real estate market and the increasing non-banking assets of banks, the Commission has also suggested issuing the necessary law to establish an asset management company in public-private partnership.

The formation of AMC is not new. Why could this not happen? It would have been better if this report had drawn attention to that.

In addition, the report mentions that to solve the problems seen in the cooperative sector, legal arrangements should be made so that the scope of work of savings and credit cooperatives does not exceed the geographical area of one local level, and that cooperatives should prohibit companies or any organized organizations from becoming members. This is practical in the current context and the sustainability of the S&P should also be considered.

Similarly, it is advisable to make a legal provision for a single obligatory loan limit in savings and credit cooperatives, similar to financial institutions, and to temporarily prohibit the total loan amount from one or more banks to a single person from exceeding ten percent of the total share capital of the investment institution.

        The government has had to significantly increase its CAPEX to GDP ratio in recent years, and the main challenge is how to maintain the momentum by setting fiscal targets.

        The external economic environment also affects the outlook, with particular attention to the impact of the Trump administration taking office in 2025. The Nepalese currency is depreciating at a rapid pace.

        A forecast for 2025 would be interesting and informative, highlighting both risks—such as the possibility of slower-than-expected growth—and positive developments, including a potential disruption due to commodity prices.

        The external economic environment also affects, with particular attention the effects of the Trump administration that took office in 2025. The devaluation of the Nepalese currency is accelerating. It would be interesting to have a forecast for 2025, highlighting both risks—such as the possibility of slower-than-expected growth—and positive developments, including a possible disruption due to commodity prices.

        The main reasons for the country’s economic slowdown include: unstable politics, lack of investor-friendly policies, weak infrastructure, disruptions to regular power supply, contradictory laws, bureaucratic inefficiency, ambiguity and corruption, ineffective enforcement of intellectual property laws, lack of skilled manpower, lack of investor protection agreements, limited incentives for production, etc.

        In addition, the transition to federalism provides an opportunity for provincial and local governments to ensure that government funds are used transparently and effectively to provide public goods and create local-level initiatives to drive economic growth. Public participation in local governance mechanisms should be ensured.

Investment should be encouraged through tax incentives, reducing barriers, and creating a stable business environment. Investment in infrastructure, technology, and education helps attract businesses and create jobs, which in turn, boosts economic growth.

Research and development should be encouraged through incentives and subsidies. Innovation can help increase productivity and competitiveness and lead to new products and services that create jobs and drive economic growth.

Improving the quality of education to enhance the skills of the workforce. Education can help create a more skilled workforce, which in turn can create a virtuous cycle of higher productivity and higher wages, creating growth.

Investing in infrastructure such as roads, bridges, airports, and ports makes it easier for businesses to transport goods and services and can help attract new businesses and create jobs.

Promoting international trade by removing barriers to trade and investment in infrastructure. International trade can increase the size of the market for goods and services, which can increase production, job creation, and economic growth. Small businesses are a major source of job creation and innovation, and supporting them can help drive economic growth.

Inflation must be managed to ensure stable prices and a stable economy. Inflation can reduce the value of money, making it difficult for businesses to invest and consumers to spend, which can slow economic growth.

At a time when the country's economy is currently in crisis, the High-Level Economic Reform Advisory Commission has made important suggestions to the government for economic reform. It has identified the problems seen in the economy and suggested steps that the government should take. Although economic growth was limited to 3.4 percent in the first quarter of the current fiscal year 2081/82, it is timely that it has prepared a list of urgent tasks and submitted them to the government to make the economy more dynamic and strong. The commission appears to have discussed with stakeholders, collected suggestions, identified problems, and prepared point-by-point suggestions for reform.

        In this context, the first priority of the private sector for economic reform is to boost the declining morale of the private sector. While public confidence has declined, business morale has also declined. This problem has arisen because both the government and the private sector have failed to increase investment. At first glance, Nepal’s biggest problem seems to stem from political instability. And, if political obstacles are resolved, we would be better off.

It is said that we rarely work hard and we hardly work smart. The majority of Nepalis have traditionally and by nature been hard workers, toiling in the fields every day. Some of us may feel that all the ups and downs have come since the country successfully ended the conflict through a peace process from the Kingdom of Nepal to become a federal democratic republic with a new constitution. It has been a decade since then, and the most challenging task lies ahead of us. It is easy to start a revolution. It is equally difficult to end it with fruitful results.