Monday, November 23, 2015

Cost of inaction higher, set up Economic War Room to handle crisis: Experts

Economists have suggested the government to set up an Economic War Room to fight the current crisis.
Accusing the government of not being serious even after 100 days of the Tarai-Madhes unrest and 2 months of Indian blockade, they said the government should go on a war footing to address the people’s woes.
The government lacks seriousness and has failed to address the people’s woes,” they said, adding that the people have been suffering due to shortages of essentials like cooking gas, petrol and life-saving drugs.
Saying that cost of inaction is higher, they also accused the government of lack of crisis management skills. “The government completely lacks crisis managerial skills,” said industrialist Hari Bhakta Sharma. “The government is ineffective and weak as it has failed to address the crisis,” he said, adding that it has also failed to maintain law and order. "The government, instead of solving the crisis, has only aggravated it."
The apathy of the political parties has also aggravated the crisis, Sharma said calling for diversification of the economy. “Trade diversification does not mean that Nepal imports from China what it used to import from India,” he explained.
Stating that the weak state machinery has fuelled the black market, he suggested the government making the distribution channels more efficient. "The demurrage and detention charges that industrialists have been paying will hurt the economy,” he added.
Urging the government to make clear its industrial and economic policy, the industrialist also gave examples of other countries where the governments had rescued the economy in times of crisis.
Foreign investment will not come to any country where domestic investment is not secure, he said also asking the government to safeguard domestic investment to save jobs too. Rising unemployment is perceived to create security problem later.
Linking the current economic crisis to national security, former member of the National Planning Commission (NPC) Swarnim Wagle said that a country can be either attacked directly with armed forces or the economy can be weakened for takeover.
He suggested analysing the current crisis from four angles: fiscal, monetary, external sector and real sector. “Under fiscal sector, revenue mobilisation is very discouraging,” he said, adding that revenue mobilisation in the first four months is only 70 per cent of target and half that of the same period of last fiscal year. “It will hit development work directly and economic growth in the long run, which is a serious matter.”
From the monetary angle, black marketeering has become rife and people are forced to pay four times the normal price of goods, which will hit the poor most and build up inflationary pressure.
Likewise, exports have dropped by 25 per cent in the first four months, whereas imports have dropped by 35 per cent. The decline in imports will ultimately hit exports also, he said, adding that remittance alone has cushioned the current trade imbalance. “It will pull economic growth down but we cannot yet see the floor of that effect.”
A strong aviation sector however could rescue land-locked countries like Nepal in times of blockades, Wagle suggested.
Asking the government to continue with its second generation reforms to build up economic competitiveness, he said it was necessary to improve interdependency with neighbours. “In normal times too, Nepal must have good trade relations with China, apart from improving customs arrangements with the southern neighbour for more cross-border trade.”
Madan Kumar Dahal, another economist, on the occasion, also said that Nepal Rastra Bank and the IMF have also painted a bleak economic picture. Calculating that the current crisis has caused the Nepali economy to lose Rs 540 billion, he also warned of a humanitarian crisis as there are no life-saving drugs in the hospitals due to the Indian blockade and the Tarai-Madhes unrest. Dahal also suggest the government to declare an emergency to maintain smooth supplies. The government must bring in austerity measures and start a discipline campaign to maintain good governance, he suggested, adding that weak governance has fuelled the black market and spawned a parallel economy, which will further weaken the state and hit the poorest of the poor hard. "The inflation will go out of control from government's hands."

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