Private sector urges swift measures as Nepal grapples with economic challenges

KATHMANDU: The government is actively pursuing measures to address the ongoing economic crisis, as the national economy continues to struggle despite previous reform efforts.

Prime Minister Pushpa Kamal Dahal conducted discussions on Monday with representatives from various ministries, the National Planning Commission, and Nepal Rastra Bank to evaluate the current economic state and explore strategies to tackle the national economic crisis.

During the meeting of the ruling Nepali Congress, Finance Minister Dr. Prakash Sharan Mahat provided an overview of the economic situation. Attendees emphasized the urgent need for government action to rejuvenate the economy, with a specific focus on post-quake relief and reconstruction in Jajarkot and Rukum Paschim for earthquake survivors.

Although external economic indicators show some improvement, internal indexes remain in crisis. Issues such as the lackluster implementation of government policies and budget, low capital expenditure, reduced credit flow, high-interest rates, decreased consumer demand, and a decline in private sector morale are contributing to the economic downturn.

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI), representing the private sector, hosted a ‘National Economic Talks’ on October 12 to propose solutions to the economic crisis. Prime Minister Dahal expressed openness to the creation of a high-level mechanism for economic reforms in response to private sector suggestions.

Both the government and the private sector emphasize the importance of collective efforts and responsibility across sectors to address economic challenges. Despite policy and procedural reforms outlined in the current fiscal year’s budget, weak implementation remains a concern.

Looking ahead, the government plans to host an international investment summit in April 2024, pending approval from the Cabinet. However, the current economic situation reveals a significant gap between government expenditure and revenue targets in the first quarter of the fiscal year.

As of mid-November, government spending is only 20 percent of the annual target, with revenue collection at 20.08 percent of the goal. Inflation stands at 7.5 percent, exceeding the government’s target of 6.5 percent. While remittances have seen a robust 30 percent growth, the struggle to expand loans is evident in the banking sector.

Despite challenges, there is a surplus in the balance of payments, driven by a 1.7 percent increase in imports and a 2.3 percent decrease in exports during the first quarter. The government remains committed to addressing economic issues and fostering a dynamic economic environment.