Global crisis may engulf Nepal too

Nepali economists sound optimistic despite the global financial crisis. However, they have warned that Nepal also might land up in a financial soup if domestic problems get out of hand. According to them, the global crisis has also highlighted the role of regulator and the negative aspects of rising consumerism.
The global meltdown has not had any impact on our economy till date, said finance secretary Rameshwor Khanal while speaking at a programme 'Growing economic slowdown and its impact on Nepal' organised by Manmohan Memorial Academy here today.
"The indicators of tourism, remmittance and exports, the key factors that could be affected by the global economic crisis are still in positive mode," he said adding that the government has been seriously studying the crisis and the probability of its impact on Nepal.
"The crisis can have both positive and negative impact on our economy," said Constituent Assembly (CA) member and industrialist Binod Kumar Chaudhary while commenting on the paper of former finance minister Bharat Mohan Adhikari. "Domestic and foreign investments of banks should be scrutinised," he said adding that this was the right time to delink Nepali rupee from Indian currency.
Dr Raghav Dhoj Pant, a veteran economist, agreed that the exchange rate between India and Nepal needs review. "Due to the weak Indian rupee against the US dollar, the Nepali rupee is also suffering," he said adding that remittance may see increase due to weak rupee but that will encourage consumerism leading to more imports and trade imbalance which would be fatal for Nepal's financial system.
Deependra Bahadur Chhetri, former National Planning Commission (NPC) member urged the government to create more jobs. "The government should invest heavily in infrastructure projects to create more jobs and thus avert any possible crisis," he said, giving the example of the US recession of the '30s.
In the US also, the government is punping in money to rescue financial institutions and even the auto industry. "There are deep-rooted fundamental issues that need correction," Dr Ram Sharan Mahat, former finance minister said. "However, fundamental correction will take time," he said adding that the global crisis would have its impact on Nepal's economy.
"The domestic banking sectors' exposure and their portfolio have to be seriously monitored as the role of the regulator like Nepal Rastra Bank (NRB) was key in averting such crisis, he opined. "If real estate prices come down, financial institutions may face problems even if real estate was only 12 to 13 per cent of their total loan portfolio."
Presenting his paper, UML leader Bharat Mohan Adhikari showed serious concern over the foreign aid and repayment of foreign aid due to financial crisis in donor countries.