Tuesday, November 24, 2015

Inflationary pressures to worsen: White Paper

The government has projected economic growth to hover around 2 per cent and inflationary pressures to increase due to supply side constraints.
Issuing a White Paper – 'Current Economic Scenario of the Country: Government's Immediate Action Plan' – today, finance minister Bishnu Prasad Poudel said that economic growth could plunge further, if the current obstacles and strikes continue. The government, in the budget for the current fiscal year, had projected 6 percent economic growth.
Lower development expenses and imports are also going to hit economic growth, Poudel added.
The government – after 100 days of the Tarai-Madhes unrest and two months of Indian
blockade – has brought the White Paper without mentioning 'Indian blockade,' let alone the measures to fight it.
Though he has failed to spell out any remedies to address the current economic crisis, he said that industries, agriculture and the service sector, apart from the social sector, have been badly affected. “The shortage of essential goods and services like drugs and fuel is leading toward a humanitarian crisis," he said.
The finance minister also said that the current obstructions have negatively impacted socio-economic conditions. The current crisis has added to the challenge for the incumbent government to graduate Nepal from developing country status by 2022 and to a mid-income status by 2030, he added. "The government also has the challenge of making the economy self-reliant."
Poudel has tried – without any concrete plans – to assure the people of energy security, food security, maintaining of law and order, and starting reconstruction work without delay to bring respite to earthquake victims.
He also did not forget to mention alternative routes for imports, encouragement of electric vehicles, involvement of the private sector in the petroleum business, continuity for the economic reforms programme, industrial security, facilitation of industries, good governance, increment of domestic production, encouragement to foreign investment, tourism promotion, economic diplomacy, and transparency in fuel distribution, apart from an effective monitoring system, though he lacked any concrete plans to address them.
However, the market is riddled with black marketeering in fuel, which has increased the pressure on inflation. The minister admitted that market prices are going up due to shortages and the black market.
The central bank in a report – Impact of Indian Blockade in Nepali Economy – last week had painted a bleak economic picture. It has also projected inflationary pressures due to the Indian blockade that has led to supply disruption and lower economic growth, even negative economic growth.
As inflation is going to post double-digit growth, the White Paper also projected that it will hit people hard. The central bank has – in its Monetary Policy for the current fiscal year – projected inflation to remain under 8 per cent. However, worsening shortage of essential goods and services, lower domestic production and the rampant black market are going to push inflation to more than 10 percent.
The population out of employment – due to the obstructions and strikes – is going to be hit hard by rising market prices, and they will be pushed under the poverty line. "The devastating earthquake has pushed some 700,000 Nepalis below the poverty line, and the number is going to increase due to the current crisis," Poudel said.

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