A year of govt: Economy making positive headway

It is going to be a year since the formation of the incumbent government led by Prime Minister Pushpa Kamal Dahal 'Prachanda'.

The economic condition of the country was not in a good shape when the government assumed its responsibilities. The internal and external sectors of national economy were under tremendous pressure due to COVID-19 pandemic and Russia-Ukraine conflict among others.

Compared to the previous year, the economic indicators are moving towards positive direction at present. Rays of hope could be seen in the financial and monetary sectors.

Immediately after the formation of the government, the meeting of Council of Ministers was convened on December 26, 2022 and decided to proceed with economic reform at policy, procedure and institutional level according topmost priority.

The reformative actions seem to yield some desired results as well. The external sector is in comfortable condition while there has been a considerable increase in the remittance inflow and influx of foreign tourists.

Improved indicators

Looking at the major economic indicator of the country during the past one year, there are signs of improvements. The inflation has decreased in comparison with the last year.

The statistics of Nepal Rastra Bank (NRB) showed that the consumer price inflation had remained at 7.38 percent as of mid-December 2022. The inflation rate in the first four months of the current fiscal year stands at 5.38 per cent.

The external sector was terribly in a bad shape last fiscal year. The total foreign exchange reserve was Rs 129.56 billion. The foreign exchange reserve was able to cover 10 months of import of goods and 8.7 months of imports of goods and services.

The foreign reserve exchange as of mid- November this fiscal year is Rs 169.6 billion. Considering the import of last four months of the current fiscal year, it seems that the current foreign exchange reserve could cover 13.6 months of import of goods and 11.4 months of import of goods and services.

Similarly, there has been a noticeable improvement in arrival of foreign tourists and remittance inflow compared to the last year. Over 954,000 foreigners visited Nepal in the last 11 months of 2023.

 The remittance inflow increased by 26.4 per cent and reached Rs 477.96 billion in the first four months of the current fiscal year.

The balance of payment is at surplus of Rs 147.11 billion.

The government has heeded the repeated requests made by the entrepreneurs to consider reducing the bank interest rate. The inter-transaction rate of the banks and financial institutions are, thus, declining lately.

The weighted average inter-bank transaction among the banks was 8.50 per cent as of mid-November last fiscal year. It has come down to 3.47 per cent during the same period this fiscal year.

After the first quarterly review of existing monetary policy, Nepal Rastra Bank (NRB) reduced the bank rate from 7.5 percent to seven percent, while the policy rate from 6.5 percent to 5.5 percent.

It has been taken positively by the businesspersons and industrialists, for they had demanded it for long.

However, the rising public debt and deficit budget are worrying issues in Nepali economy.

In the first quarter of the current fiscal year alone, Nepal witnessed increase of the public debt of Rs 57.71 billion.

Coupled with this is inability to increase capital expenditure. The revenue failing to meet regular expense is equally upsetting. These are important areas the government needs adequate attention.

Till the Mangsir end (mid December), the government has been able collect only 26.07 percent of the target revenue for the year.

Meanwhile, the government has taken significant decisions on infrastructure developments this past one year. The decision to forward constructions of Budhigandaki and Karnali Chisapani Reservoir-based Hydropower Projects are taken positively.

Similarly, taking ahead the Upper Aruan and Dudhkoshi Hydropower Projects are other welcome initiatives.

 The national pride project, Pokhara Regional International Airport, was inaugurated on January 1, 2023.

The installed hydropower capacity has so far reached 28,000 MW in Nepal, which is some 94 percent coverage in the country.

Of late, the government has intensified the process to export the surplus power. Various programmes are run on clean drinking water.

Foreign visits to boost relations, economy

Moreover, PM Dahal conducted visit to India and China last year. Many important agreements were signed during the visit. An understanding was reached to forward a process for tripartite agreement after agreement in principle to start export of electricity produced in Nepal to Bangladesh via India.

During the visit, an agreement was signed to sell 10,000 MW electricity in 10 years from Nepal as well as to finalize the detailed project report of Pancheshwor multi-purpose project within three months.

Similarly, an agreement was reached to amend Nepal-India Transit treaty in course of India visit as well as expanding petroleum pipeline from Amalekhgunj of Bara to Lothar of Chitwan and Siliguri of India to Charali of Jhapa with financial and technical support of India.

Likewise, Nepal and India signed memorandum of understanding related to cross-border digital payment.

PM Dahal embarked on China visit on third week of September and the two countries signed various agreements for mutual cooperation in different sectors.

Both countries have agreed for collaboration in inter-state infrastructures development, trade promotion and facilitation, expansion of diplomatic relations and regional cooperation.

Similarly, an agreement was reached to take 'BRI Implementation Project' soon to conclusion in order to forward the agreement signed on May 12, 2017 for bilateral collaboration as per 'Belt and Road Initiative Framework'.

Both sides agreed to build 'Trans-Himalayan Multi-Dimensional Connectivity Network' as well as to reopen Nepal-China check points. China and Nepal made the understanding to give final shape to 'Nepal-China Electric Power Co-operation Plan' as well as to initiate the activities of 200-kV. Jilong-Kerung-Rasuwagadhi-Chilime Inter-state Transmission Line as soon as possible.

Meanwhile, the government has made preparation to organise investment summit in Kathmandu from April 21, 2024.

A directive committee under coordination of Finance Minister, an implementation committee under coordination of the Chief Secretary and a technical committee under coordination of Secretary of Ministry of Industry, Commerce and Supply were formed to organise the investment summit.