Government faces criticism for economic management and public debt increase

KATHMANDU: Economists and analysts have voiced their concerns over the Nepalese government’s failure to adhere to announced austerity measures, adversely impacting economic growth and significantly raising public debt. Speaking at the parliamentary Finance Committee, experts criticized the government’s budget principles and priorities for the upcoming fiscal year and urged a focus on reducing expenditures through evidence-based economic analysis.

Biswo Poudel, former vice-chairman of the National Planning Commission, attributed the current economic challenges to excessive government spending in unproductive sectors, leading to a substantial increase in public debt over the past decade, now standing at Rs 2.4 trillion. Poudel emphasized the necessity of expanding projects while reducing reliance on public borrowing.

Professor Shiva Raj Adhikari, head of the Central Department of Economics at Tribhuvan University, criticized the government for neglecting to boost private sector confidence. Adhikari stressed the importance of a thorough economic analysis to achieve meaningful economic growth.

Despite favorable external indicators, such as foreign currency reserves sufficient for 14 months of imports and surplus current accounts and balance of payments, the domestic sector faces challenges. Banks, despite having ample liquidity and reduced interest rates, struggle to expand due to a sharp decline in loan demand. Additionally, an increasing proportion of non-performing loans poses challenges for financial institutions.

Dipendra Bahadur Chhetri, former governor of Nepal Rastra Bank (NRB), emphasized the need for the government to endorse projects that reduce the country’s financial burden and implement effective austerity measures. Chhetri called for economic policies developed through political consensus, categorization of social securities based on income, and improved bureaucratic procedures for timely reimbursement from foreign donors.

NRB Governor Maha Prasad Adhikari acknowledged the challenges but assured the safety of the overall financial and banking sectors. He raised concerns about a group with vested interests attempting to undermine the country’s banking sector, potentially impacting its stability. As the government faces criticism, calls for comprehensive economic policies, fiscal responsibility, and private sector support grow louder to navigate Nepal through its economic challenges effectively.