Monday, May 2, 2016

UN body asks government to strike balance between fiscal and monetary policy to spur productive growth

A UN body has asked the government to strike balance between Fiscal Policy and Monetary Policy to spur productive growth.
Speaking at a function organised to unveil the report of 'Economic and Social Survey of Asia and the Pacific 2016' produced by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) in Kathmandu today, economic affairs officer at the Macroeconomic Policy and Financing for Development Division of UNESCAP Sudip Ranjan Basu said that the Monetary Policy alone cannot shoulder the growth and that the Fiscal Policy has become more important to boost and redistribute the growth. "Productive growth has been slowing in recent years," he said, adding that quality of labour, access to finance to SMEs, and poor infrastructure are hitting productivity. "Productivity could be increased, if the government manages to strike balance between the Fiscal Policy and the Monetary Policy."
The contrast in Fiscal and Monetary Policy has hampered the economic growth, the UNESCAP report stated, suggesting the government to boost under disbursement of allocated budgets, improve tax administration and compliance, and accelerate reconstruction activities through issuance of reconstruction bond. "The government for maximum utilisation of domestic resources in increasing productivity as the Official Development Assistance (ODA) from rich countries have been drying for various reasons,"
Analysing the findings of the report executive chairperson of the South Asia Watch on Trade, Economics and Environment (SAWTEE) Posh Raj Pandey, said a proactive Fiscal Policy could help speed up spending. "Smart and active Industrial Policy, ensuring investment climate, and social protection for transition class, could help poor out of the poverty line," Pandey said, adding that active and efficient governance is a must to ensure growth.
The report, one of the oldest reports coming from UN agencies, states that some 1.7 million people could be out of poverty, if the agriculture productivity could be increased.
The Asia Pacific report also stated that the region as a whole has experienced considerable slowdown in economic growth and productivity gains in recent years. "The Asia Pacific region's progress on poverty reduction is slowing, inequalities are rising and prospects of decent employment are weakening," it said, adding that productivity and Sustainable Development Goals (SDGs) are closely linked and investing in these goals will increase productivity and help economic growth.
The regional report has projected Nepal to grow by 2.2 per cent in the current fiscal year, which is the lowest in the region. However, the inflation that the report has projected is the highest in the region.
Catastrophic earthquakes in April 2015, subpar monsoon season that resulted in weak agricultural growth and recent strikes and disruptions of trade routes in certain parts of the country have hit the growth in the near term. In the medium-term, the report states, a trade agreement with the USA and also an agreement with India to develop two large-scale hydropower projects could spur growth in the coming fiscal years.

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