Retrospect: 2010 Lost Opportunities

The year 2010 will be remembered as a year wasted in the history of Nepal as the politics again pushed the economy to the back seat.
The delayed-budget hurting the development activities, Balance of Payment (BoP) deficit, six fold higher imports to the exports coupled by ballooning trade deficit marked the year.
However, the government in the current fiscal year's budget — that was presented four months late than the regular schedule — has projected 4.5 per cent gross domestic product (GDP). But International Monetary Fund projected that the real GDP for the year 2010 is going to be at three per cent that could increase to four per cent in the year 2011.
However, finance secretary Rameshwor Khanal thinks that the three per cent growth is not bad in the transition phase of a country.
Similarly, the IMF projected the consumer price at 10.5 per cent against the government's projection of seven per cent that could not be contained due to the rising fuel prices and growing informal economy that is as big as the formal economy.
In the fiscal year that ended on July 16, the government had projected 5.5 per cent Gross Domestic Product (GDP), but the government's claim turned hollow after the country recorded almost the half to 3.5 per cent growth from the projection due to low yield in the agriculture — especially the major crops like maize and paddy — and non-agriculture sector's low output than expected. This year too the major indicators are not that encouraging.
The government also failed in curbing the price hike, as the inflation recorded 10.7 per cent against the projection of seven per cent.
The petroleum price hike this year has fuelled the price to go up making it difficult for the government or the central bank to crack whip on inflation. The double digit price hike and slower growth have had an adverse impact on the consumers’ purchasing power, posing a serious threat to the financial management.
Finance minister of the caretaker government Surendra Pandey also failed in increasing employment despite the year 2010 being more strike less compared to a year ago. But the new industry registration has come down making it more difficult for the government to create jobs in the country.
According to the 2010 Index published by Heritage Foundation and Wall Street Journal Nepal ranked 130th scoring 0.5 point lower than last year, reflecting declines in five of the 10 economic freedoms due to political instability that has hampered the development activities as the successive governments have not been able to spend properly on development activities.
Due to ballooning trade deficit and slowdown in growth rate of remittance, the Balance of Payment (BoP) has also registered deficit prompting the central bank to take IMF help.
The life line of Nepali economy — remittance — has also witnessed a drop in its growth rate that hovered around 10 per cent due to post-global economic crisis impact in the isolated economy like Nepal.
The whopping import that is over six times to the exports has also hurt forex reserve that has been depleting throughout the year.
Though, in the first four months of the current fiscal year, the country has reported a minimal increase of 7.1 per cent to Rs 4.37 billion exports compared to the same period last fiscal year, according to the Trade and Export Promotion Centre, the scenario is not very encouraging due to investors — local and foreigners — waiting the parliament to choose new Prime Minister to end the present dead-lock.
The country could not attract more foreign Direct Investment (FDI), not only due to lack of stable government but also due to chronic power shortage problem.
The country is witnessing indefinite hours of power outage due to mismatch between the increasing demand and supply coupled with government's apathy towards the hydropower sector that is the engine for the economic growth in a country like Nepal. The annual domestic energy demand is reportedly increasing by 10 per cent.
No new domestic and foreign investment has forced the 400,000 youths that come to the market every year opt for foreign jobs. More than 200,000 youths opt for the foreign employment making the country lose its human capital at a very cheap price.
The only good sign the country has seen is the sustained growth of tourist arrivals, but that has not been able to boost the foreign currency reserve, according to the central bank.

NRB set to move court seeking liquidation of Nepal Development Bank

Nepal Rastra Bank's (NRB) Board meeting, finally, decided today to move to Patan Appellate Court for the liquidation order of the troubled Nepal Development Bank (NDB).
The NRB board took the decision after it was not satisfied with the clarification NDB submitted on Thursday. "The clarification is abstract," a board member said.
Earlier, the NRB on Friday has again sought NDB's clarification either it was of the Board of Directors' decision or the chairman's only as the clarification letter submitted to NRB on Thursday was signed by the NDB chairman Amar Gurung only. The NRB had asked NDB's board to clarify its stand.
On June 2, the NRB has decided to seek explanation with the ailing development bank on why should not it be liquidated. The NRB has given it a 15-day to submit the clarification.
According to the clause 86 of the Nepal Rastra Bank Act, NRB has given a 15-day deadline for the clarification to NDB. The NRB will now file a case at Patan Appellate Court seeking permission for NDB's liquidation under clause 74 of Banks and Financial Institutions Act (BAFIA).
On June 18, NDB submitted a capital plan seeking time till October 17 to improve its financial health. It had claimed that given the opportunity, it could sell shares of various institutions and get back the deposit from National Cooperatives as instructed by NRB. "It still would need an additional Rs 70 million capital injection after it managed to get its money back," according to the NDB.
"The NDB could not be revived as there isn't any guarantee that it will make amends as it has repeatedly been flouting the central bank's directives," said the NRB that has frozen its all accounts after it sought explanation.
According to the findings of central bank, small depositors will get their money back since the financial institution has Rs 16.5 million in cash and Rs 160.3 million bank deposit. Employee Provident Fund (Rs 331.4 million) and the Nepal Army (Rs 180 million) might not get their money back but small depositors that are around 3,5 00 need not worry, NRB said.
NDB -- the nation's first development bank -- started operations in 1998. Though it has a paid-up capital of Rs 320 million, it ran into huge losses, pegged at Rs Rs 690.2 million till the end of mid-March. Its non-performing assets are at 55.09 per cent and capital adequacy ratio (CAR) stands at a whopping 48.31 per cent. As per rule, a bank must maintain its CAR at 11 per cent.
On October 11, 2007, NRB had declared NDB a problem institution and directed it to take a slew of corrective measures but NDB never toed the central bank's regulatory obligations and played dirty with depositors' money.