Despite being historically powerful and two-third majority government, KP Sharma Oil government wasted yet another year as economy failed to gather steam.
The past 12 months of the year 2019 have neither witnessed a remarkable achievement in economy nor in governance, despite the government has set an ambitious target of 8.5 per cent economic growth for the fiscal year 2019-20. Economic indicators are not so encouraging, though this is the second year of the incumbent government that has been making tall claims – of making Prosperous Nepal, Happy Nepali – ever since it came to power.
First thing first, the budget implementation – as always – remains lethargic, policy implementation continued to be fragile and business environment not so impressive, and the most dangerous part is private sector is fast losing confidence.
Finance Minister Dr Yuba Raj Khatiwada had defended the slow economic growth in the last fiscal year 2018-19 citing that the government throughout the year was focused on developing regulatory framework in line with federalism and the needs of the business community. He has to, however, find another excuse for the current fiscal year for not being able to meet the ambitious growth target of 8.5 per cent, as the economy seems not moving in the right direction to achieve his own target despite his tall claims of focusing on effective budget implementation, development activities and economic growth.
As always, the government failed to accelerate capital budget spending, which will directly hit the capital formation in the coming years too. According to Financial Comptroller General Office (FCGO), the government has, as of today, been able to spend only a mere 10.24 per cent – of Rs 408 billion capital budget –allocated for the current fiscal year 2019-20.
Likewise, the national pride projects including Gautam Buddha International Airport, Upper Tamakoshi Hydropower Project and Melamchi Drinking Water Supply Project expected to be completed within 2019 are yet to be completed. However, it also offers a hope for the next year 2020 as they are nearing completion.
The lifeline of Nepali economy, remittance has also witnessed a slowdown – in the five months of the current fiscal year – as it has dropped compared to the remittance inflow in the last fiscal year. Though, the number of outbound migration of the Nepali workers increased, remittance witnessed a fall by 2.3 per cent to Rs 304.97 billion until mid-November against an increase of 36.4 per cent in the same period of the last fiscal year, according to the central bank data. However, Nepal is still one of the highest remittance recipients in the world with remittance inflow comprising almost equal to 30 per cent of GDP.
Though, the government claimed to have brought some reforms, Global Competitive Report 2019 published by the World Economic Forum in October has ranked Nepal 108th out of 141 economies as Nepal is the worst performer in South Asia in terms of competitiveness.
Likewise, the share market has also not been performing well since Oli appointed Dr Yuba Raj Khatiwada as the finance minister. The share market failed to boost the investors' confidence as the market is under bearish trend since last two years.
Yet another mainstay of Nepali economy, the tourism sector has also not been performing well. The tourist arrivals, though has seen improvement, the count could not surpass last year, which will hit the Visit Nepal Year 2020 also.
Despite gloomy picture, there are some ray of hopes in the late months of 2019 as the trade deficit narrowed – though it seems not sustainable – and Balance of Payments (BoP) position remained in surplus of Rs 27.29 billion till mid-November against a deficit of Rs 57.33 billion in the same period of the last fiscal year. “The total trade deficit narrowed down by 8.9 per cent to Rs 414.02 billion in the four months of current fiscal year 2019-20, though such deficit had expanded 37.8 per cent in the same period of last fiscal year,” according to the central bank data that reveals that merchandise exports increased by 23.9 per cent to Rs 36.28 billion compared to an increase of 11 per cent a year ago, while merchandise imports decreased by 6.9 per cent to Rs 450.3 billion against an increase of 35.8 per cent in the same period of the last fiscal year.
The government has claimed that it introduced many policies to improve the business environment in the country but investors are still suspicious over effective implementation of the policies apart from a number of contradictory policies on tax issues that have discouraged the business community. Though, Nepal improved its ranking by six positions to the 94th position – out of 190 economies across the world – in Doing Business Report 2020 against 110th position in 2019, the private sector is losing confidence due to government’s anti-private sector move.
Despite the political stability – that the private sector craved for in last 3 decades – the two-third majority government is creating fear in the business community instead of instilling confidence by also using government machinery to seek ransom from private sector.
The private sector is more hesitant and losing confidence gradually due to various restrictive policies of the government that have provisions of imprisonment even for minor mistakes, apart from ransom seeking attitude, one of the prominent business person said, adding that despite stable government and reliable supply of electricity, the business community has hold all the investment plans recently.
Likewise, the government has also failed to crack whip on inflation as the consumer price inflation (CPI) stood at 5.76 per cent in mid-November compared to 4.15 per cent during the same period in the last fiscal year.
The economy, however, grew by 7.1 per cent in the last fiscal year, the third continuous year that the economy has expanded by over 6 per cent. And the economy is poised to expand by around 6 per cent in the current fiscal year, according to projections of development partners including World Bank (WB), Asian Development Bank (ADB) and the International Monetary Fund (IMF).
Despite government’s effort to bring in notable amount of foreign investment, in the fiscal year 2018-19, Nepal received Rs 13.07 billion in FDI against the pledged Rs 24.99 billion. Likewise, as against FDI commitment of Rs 55.73 billion in the fiscal year 2017-18, Nepal was able to see only Rs 17.51 billion in actual investment. Nepal, however, received investment commitments worth Rs 10.76 billion in the first three months of the current fiscal year, up from Rs 4.8 billion during the same period last year.
The past 12 months of the year 2019 have neither witnessed a remarkable achievement in economy nor in governance, despite the government has set an ambitious target of 8.5 per cent economic growth for the fiscal year 2019-20. Economic indicators are not so encouraging, though this is the second year of the incumbent government that has been making tall claims – of making Prosperous Nepal, Happy Nepali – ever since it came to power.
First thing first, the budget implementation – as always – remains lethargic, policy implementation continued to be fragile and business environment not so impressive, and the most dangerous part is private sector is fast losing confidence.
Finance Minister Dr Yuba Raj Khatiwada had defended the slow economic growth in the last fiscal year 2018-19 citing that the government throughout the year was focused on developing regulatory framework in line with federalism and the needs of the business community. He has to, however, find another excuse for the current fiscal year for not being able to meet the ambitious growth target of 8.5 per cent, as the economy seems not moving in the right direction to achieve his own target despite his tall claims of focusing on effective budget implementation, development activities and economic growth.
As always, the government failed to accelerate capital budget spending, which will directly hit the capital formation in the coming years too. According to Financial Comptroller General Office (FCGO), the government has, as of today, been able to spend only a mere 10.24 per cent – of Rs 408 billion capital budget –allocated for the current fiscal year 2019-20.
Likewise, the national pride projects including Gautam Buddha International Airport, Upper Tamakoshi Hydropower Project and Melamchi Drinking Water Supply Project expected to be completed within 2019 are yet to be completed. However, it also offers a hope for the next year 2020 as they are nearing completion.
The lifeline of Nepali economy, remittance has also witnessed a slowdown – in the five months of the current fiscal year – as it has dropped compared to the remittance inflow in the last fiscal year. Though, the number of outbound migration of the Nepali workers increased, remittance witnessed a fall by 2.3 per cent to Rs 304.97 billion until mid-November against an increase of 36.4 per cent in the same period of the last fiscal year, according to the central bank data. However, Nepal is still one of the highest remittance recipients in the world with remittance inflow comprising almost equal to 30 per cent of GDP.
Though, the government claimed to have brought some reforms, Global Competitive Report 2019 published by the World Economic Forum in October has ranked Nepal 108th out of 141 economies as Nepal is the worst performer in South Asia in terms of competitiveness.
Likewise, the share market has also not been performing well since Oli appointed Dr Yuba Raj Khatiwada as the finance minister. The share market failed to boost the investors' confidence as the market is under bearish trend since last two years.
Yet another mainstay of Nepali economy, the tourism sector has also not been performing well. The tourist arrivals, though has seen improvement, the count could not surpass last year, which will hit the Visit Nepal Year 2020 also.
Despite gloomy picture, there are some ray of hopes in the late months of 2019 as the trade deficit narrowed – though it seems not sustainable – and Balance of Payments (BoP) position remained in surplus of Rs 27.29 billion till mid-November against a deficit of Rs 57.33 billion in the same period of the last fiscal year. “The total trade deficit narrowed down by 8.9 per cent to Rs 414.02 billion in the four months of current fiscal year 2019-20, though such deficit had expanded 37.8 per cent in the same period of last fiscal year,” according to the central bank data that reveals that merchandise exports increased by 23.9 per cent to Rs 36.28 billion compared to an increase of 11 per cent a year ago, while merchandise imports decreased by 6.9 per cent to Rs 450.3 billion against an increase of 35.8 per cent in the same period of the last fiscal year.
The government has claimed that it introduced many policies to improve the business environment in the country but investors are still suspicious over effective implementation of the policies apart from a number of contradictory policies on tax issues that have discouraged the business community. Though, Nepal improved its ranking by six positions to the 94th position – out of 190 economies across the world – in Doing Business Report 2020 against 110th position in 2019, the private sector is losing confidence due to government’s anti-private sector move.
Despite the political stability – that the private sector craved for in last 3 decades – the two-third majority government is creating fear in the business community instead of instilling confidence by also using government machinery to seek ransom from private sector.
The private sector is more hesitant and losing confidence gradually due to various restrictive policies of the government that have provisions of imprisonment even for minor mistakes, apart from ransom seeking attitude, one of the prominent business person said, adding that despite stable government and reliable supply of electricity, the business community has hold all the investment plans recently.
Likewise, the government has also failed to crack whip on inflation as the consumer price inflation (CPI) stood at 5.76 per cent in mid-November compared to 4.15 per cent during the same period in the last fiscal year.
The economy, however, grew by 7.1 per cent in the last fiscal year, the third continuous year that the economy has expanded by over 6 per cent. And the economy is poised to expand by around 6 per cent in the current fiscal year, according to projections of development partners including World Bank (WB), Asian Development Bank (ADB) and the International Monetary Fund (IMF).
Despite government’s effort to bring in notable amount of foreign investment, in the fiscal year 2018-19, Nepal received Rs 13.07 billion in FDI against the pledged Rs 24.99 billion. Likewise, as against FDI commitment of Rs 55.73 billion in the fiscal year 2017-18, Nepal was able to see only Rs 17.51 billion in actual investment. Nepal, however, received investment commitments worth Rs 10.76 billion in the first three months of the current fiscal year, up from Rs 4.8 billion during the same period last year.
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