It looks like cost of Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the largest employment guarantee public works program in the world, is coming down. Its cost as a share of GDP, total expenditure and revenue receipts is decreasing and is expected to be 0.45 percent, 3.19 percent, and 5.08 percent respectively in fiscal year 2011-2012. Here is more on MGNREGA.
| NREGA budget (Rs Crore) | ||||||
| 2006-07 | 2007-08 | 2008-09** | 2009-10** | 2010-2011* | 2011-2012* | |
| GDP, current prices# | 4,293,672 | 4,986,426 | 5,582,623 | 6,550,271 | 7,877,947 | 8,980,860 |
| Total expenditure | 583,387 | 712,671 | 900,953 | 1,020,838 | 1,108,749 | 1,257,729 |
| Revenue receipts | 434,387 | 541,864 | 562,173 | 614,497 | 682212 | 789892 |
| NREGA allocated budget | 11,300 | 12,000 | 30,000 | 39,100 | 40,100 | 40,100 |
| NREGA/GDP | 0.26 | 0.24 | 0.54 | 0.60 | 0.51 | 0.45 |
| NREGA/Exp | 1.94 | 1.68 | 3.33 | 3.83 | 3.62 | 3.19 |
| NREGA/Rev | 2.60 | 2.21 | 5.34 | 6.36 | 5.88 | 5.08 |
Source: Union Budgets; The main reason for the expected decline is that GDP, expenditure and revenue are estimated to increase but the budget allocation for MGNREGA is kept the same as during the previous fiscal year. In FY 2010-2011, 5.49 crore households were provided employment (100 days employment on demand to each household during lean season). The total persondays of employment created was 257.15 persondays (crore). Of this, the share of SCs, STs, and women accounted for 30.63%, 20.85%, and 47.73% respectively. Former finance minister Rameshore Prasad Khanal argues that the two main barriers to trade integration in South Asia are poor cross-border transport and customs infrastructure, and difficulties in swapping currencies, especially for small producers. Here is my take on regional economic integration growth in Nepal. There are two The other barrier for trade between small producers in the region is currency. Trade between most of the countries are carried out in US dollars, as a result there is little preference for goods originating from within the region. A simple mechanism of currency swap would help small producers in the individual countries find market within the region. If countries agree to allow trade of up to a certain range in the currency of respective countries and central banks swap such currency reserves periodically, then the trade within the region can get a boost even without making much improvement in the other non-tariff barriers. A simple currency swap arrangement can, in course of time, lead to full convertibility of currencies in the region. If a currency swap arrangement is agreed upon by all central banks of South Asia, then currencies would not be required to move physically as most of the settlements will take place in the books. The net differentials may only be moved physically once in agreed period framework. Exchange rates between the two currencies may be allowed to move as the market conditions demand, except in cases where two currencies are pegged with each other. Currency swap arrangement would also open up two other potential areas in the region, namely, tourism and education. If a Bangladeshi needs to cough up US dollar to come to Nepal, he/she might choose to go to Thailand in place, so does a Nepali. Many Sri Lankans would like to come to Nepal to visit Lumbini and Nepalis would just as love to go to Kandy in Sri Lanka. Many Nepalis each year travel to New Delhi but few think of going to Lahore or for that matter Karachi. Countries in South Asia have world-class educational institutions but because of currency restrictions many good Pakistani, Bangladeshi or Nepali institutions do not receive South Asian students. If one has to procure US dollars for foreign education, the natural choice would be a country outside South Asia. Currency swap arrangements would also promote students mobility in the region. Visa restrictions have not been such a problem for many in the region, but in critical cases, this has been an issue. It is reported that the recently established South Asian University, funded by all member countries on the basis of an agreed formula, has been facing difficulty receiving Pakistani students and academicians due to visa-related problems. The prolonged standoff over “new” market access, by preventing the WTO from fulfilling these objectives, is causing serious damage to the global trading system. The solution to the WTO’s problems, therefore, lies not in decoupling the WTO from the Doha Round, but in enabling it to achieve an ambitious Doha outcome based on its development mandate. […]Doha is a symptom of the deeper crisis in the WTO which is essentially due to the changed political economy of the organisation. Only when WTO members arrive at a shared political understanding regarding the future role of the organisation can we begin to see light at the end of the tunnel. Without such an understanding, arguments for decoupling the WTO from Doha have little meaning. So argues Ujal Singh Bhatia here. According to this news piece that quotes Labor Standard Survey 2008: By the end of this decade, the number of people in the age range 15 to 34 is expected to be about 14 million, which is approximately 40 % of the estimated total population in 2020.The number of people in the age group 15-24 will peak in 2017 and the 15-34 segments will peak in 2023. They will be the agents of change and a catalyst to the engine of growth. Also, it is estimated that there are about 50,000 foreign workers in Nepal working without employment authorization (you have to pay Rs 10,000 yearly if you are registered). This excludes Indian nationals because according to Nepal-India Treaty of 1950 Indians can work in Nepal without such authorization (likewise for Nepalese citizens in India). Foreigners are usually working in projects, INGOs, banks, MNCs, tourism, aviation, hotel, and beverage sectors. Emigration, 2010 Stock of emigrants: 982.2 thousands Stock of emigrants as percentage of population: 3.3% Top destination countries: India, Qatar, the United States, Thailand, the United Kingdom, Saudi Arabia, Japan, Brunei Darussalam, Australia, Canada Skilled emigration, 2000 Emigration rate of tertiary-educated population: 5.3% Emigration of physicians: 40 or 3.3% of physicians trained in the country Immigration, 2010 Stock of immigrants: 945.9 thousands Stock of immigrants as percentage of population: 3.2% Females as percentage of immigrants: 68.2% Refugees as percentage of immigrants: 13.8% Top source countries: India, Bhutan, Pakistan, China, Australia, Sri Lanka, Bangladesh, Maldives, New Zealand Here is my latest article on the banking and liquidity crisis in Nepal. For earlier pieces on the same issues, check out this and this. Nepal’s banking bubble troubles When Vibor Bikas Bank (VBB) knocked on the doors of Nepal Rastra Bank (NRB), our central bank, to either inject money in the development bank or to take over management, it rattled the banking industry and the already suspicious depositors. There were rumors and anticipation that due to excessive loan exposure to real estate, housing and construction sectors bank and financial institutions (BFIs) will land in the red sooner or later. The sudden move by Vibor made depositors panic and policymakers scurry to find a way to avert a ‘Lehman moment’—the day when US investment bank Lehman Brothers collapsed (September 15, 2008) and triggered the global financial crisis that was ensued by the global economic crisis. In Nepal’s banking history, the rescue of Vibor is a ‘Northern Rock moment’—the day when the Bank of England extended emergency financial support to the trouble mortgage lender on September 17, 2007 and saved it from collapsing. Without deep structural changes in the banking industry, Nepal will definitely see many ‘Northern Rock moments’ and eventually a disastrous ‘Lehman moment’ as well. The tendency to seek short term, quick returns against long term viability and sustainability is leading the BFIs in a path of self-destruction. For a healthy banking industry, Nepal needs fewer but stronger BFIs with sound corporate governance. Furthermore, there has to be an enhancement of regulatory and supervisory capabilities of NRB. Mushrooming BFIs In Nepal, formal banking commenced with the establishment of Nepal Bank Limited (NBL) in 1937. The central bank was established in 1956 after nearly two decades of the start of commercial banking by NBL.Then a decade later, Rastriya Banijya Bank (RBB) was established by the government. Following the financial liberalization in the 1980s, Nepal Arab Bank Ltd (now NABIL Bank Ltd) was established, making it the first foreign joint venture (JV) bankin Nepal. Then two foreign JV banks, Nepal Indosuez Bank Ltd (now Nepal Investment Bank) and Nepal Grindlays Bank Ltd (now Standard Chartered Bank Nepal Ltd.) were established in 1986 and 1987 respectively. After mid-1990s, the number of BFIs increased multifold. In 1983 and 1993 there were two and eight commercial banks respectively; and by 2006, there were 18. Meanwhile, there were three development banks in 1995, which increased to 28 in 2006. Finance companies came into existence in 1992, and by 2006, they numbered 70. Currently, there are over 292 BFIs, including 31 commercial banks, 78 development banks, 79 finance companies, and 18 microfinance institutions. The growth in number of BFIs is unprecedented and not warranted by the economic and banking fundamentals of the past decade. It was facilitated by near-retiring NRB officials, who turned a deaf ear to calls for clamping down on BFI growth, in hopes of landing on lucrative private-sector banking jobs. Status of BFIs While total deposits at commercial banks stand at around Rs 642 billion (as of April 2011), development banks and finance companies have deposits around Rs 56 billion and 67 billion respectively (as of mid-July 2009). Of the total commercial banks’ deposits, demand deposits, savings deposits, and fixed deposits stand at 12%, 36%, and 52% respectively. They have liquid funds of Rs 114 billion (cash in hand is just 16.2 billion, and deposits with NRB Rs 39.3 billion). More than Rs 110 billion is invested in real estate by the commercial banks alone. Over 72% of commercial banks’ credit flows against fixed assets. Loans and advances of commercial banks (without claims on government) stand at Rs 572 billion (as of April 2011). Meanwhile, loans and advances of development banks and finance companies stand at Rs 52 billion and 70 billion respectively (as of mid-July 2009). As a share of gross domestic product (GDP), total deposit, total credit (including claims on government) and private sector credit are 51%, 54.9% and 43.6%, respectively. Commercial banks’ deposit rate ranges from 2-12% and loans 7-18%. Interbank lending rate is as high as 10.2%. Right now, the interest spread, which is the difference between lending and deposit rates, is also high. The wider it is, more worrisome the state of BFIs. Likewise, the high inter-bank rate shows that the banks themselves are reluctant to lend money to each other. Some of the BFIs are yet to meet the revised capital adequacy ratio, which is the ratio of a bank’s capital to its risks, laid out by the NRB, keeping in mind their increasing vulnerability to excessive loan exposure to just a few sectors. Banking troubles Without a proportional increase in depositor base and diversification of investment portfolios, the unnatural growth in the number of BFIs led to intense cutthroat competition in enticing depositors (institutional, government and individual) and borrowers. Buoyed by rising remittances, the former were incentivized to deposit cash at high interest rates rather than looking for alternative sources of investment. Meanwhile, the BFIs doled out easy loans to real estate and housing sector borrowers without assessing their capacity to honor interest and principal payments in time. It led to rapid rise in real estate and housing prices in urban areas. When the abnormally high prices started to fall, the borrowers were unable to pay back interest and principal in time, leading to a shortfall of liquidity in the banking industry. Simultaneously, category B, C and D BFIs were finding it hard to borrow more from category A BFIs because the inter-bank lending rate was almost above the average of BFIs’ normal lending rates. Worse, some BFIs have prepared a negative list to not lend money to BFIs which they think are on the verge of collapse. It was, to a minor extent, compounded by the government’s inability to mobilize development expenditure, the big institutional depositors’ decision to pull out mature deposits from fledging BFIs, and a slowdown in deposits growth rate. The combined effect of all these factors hit hard banks such as Vibor that had substantial loan exposure to a few sectors, compelling them to seek NRB’s intervention. In effect, we are seeing a serious erosion of confidence in our banking system, and a surge in demand for commodities like gold and silver. Two bubbles By overlooking the need for having a limited number of BFIs, the evolving depositor base, and financial penetration over the years, the NRB let too many BFIs to pop up. This created a BFI bubble. This was followed by intense competition of not only between banks in the same category but also between BFIs in different categories, leading to an informal war in offering high deposit rates and lending without differentiating markets, products, and borrowers’ creditworthiness. It reflected bad corporate governance, and a lack of innovation and R&D in the sector. The resulting lending surge in real estate and housing markets unnaturally swelled their prices, leading to a real estate and housing bubble. Causes There have been misleading and incongruous arguments floating around about the causes of the ongoing liquidity and banking crisis. They are made by stakeholders who fail to see how their vested interests and incompetence is jeopardizing the future of the banking industry, and is potentially derailing an already unstable economy. First, bankers and businessmen are arguing that delayed budget and disbursement of development expenditures are causing liquidity crisis. This argument does not hold much water. It is true that budgets have been coming out late for two years now, and there has not been normal flow of money from the Ministry of Finance and other Ministries to the respective corners of the country via BFIs. This has definitely limited liquidity in the banking system. But it in itself is not the main cause. Instead, it is a minor stimulant to the liquidity crisis. If delay in development expenditure is the cause, then why did we not have liquidity crisis when similar episodes occurred in the past? Second, the withdrawal of large amount of money by institutional depositors, especially NRB and Nepal Army, has drastically reduced reserves in BFIs’ vaults and squeezed available liquidity. This again is a stimulant to the liquidity problem, not its main cause. If just by pulling out a few millions of mature deposits by institutional depositors puts the BFIs in trouble, then there is something wrong with the way they are doing business. It points to bankers’ incompetence and inability to run BFIs. Third, while some argue that people are either stashing money at home or are investing in commodities like gold and silver, others assert that the compulsion to divulge source of income on transactions above Rs one million is restricting deposits. Again, both are not the real causes, but stimulant to the liquidity crisis. These arguments are trumpeted by certain businessmen who are afraid of divulging their sources of income and dutifully pay taxes to the government. Fourth, some argue that a decline in reserves, precisely monetary base (which is equal to currency in circulation and reserves of banks held in central bank), due to a slowdown in growth of remittances, led to a situation where credit growth was higher than deposit growth. They assert that it is resulting in a liquidity crisis, and to return to normal, the NRB should purchase bonds and treasury bills and lower cash reserve ratio and the already high capital requirements (all of which will help increase liquidity). Of all the arguments, this holds some truth. But increasing liquidity without correcting the distorted market would only postpone the inevitable. The NRB cannot afford to play such a cat-and-mouse game each time the BFIs irresponsibly increase credit without assessing the creditworthiness of borrowers and their deposit growth. The main cause is that we have too many BFIs catering to too few customers, meaning that in order to survive and meet ever-increasing profit target, they have to have constant flow of money from all sources, that also in higher proportion than previous flows. The higher the number of BFIs, the intense will be competition to attract deposits and the need for higher liquidity. It also means doling out more loans to earn quick returns to meet profit target before the annual general meeting of shareholders and directors. Were we warned? Many financial and economic analysts failed to perceive the rapid changes happening in the banking sector. Similarly, business journalists utterly failed to even read clues of troubles starting more than a decade ago when the now liquidated Nepal Development Bank (NDB) was put under management review, and when the number of BFIs increased multifold in a matter of just five years. It might be unsurprising because a majority of business journalists in Nepal do not actually have training in economics and business. They take on-the-job training on business reporting and are behind the curve in fathoming the economic fundamentals and troubles. Ironically, the same analysts who fail to comprehend the evolving troubles are given platforms in the media and civil society, leading to circulation of incongruous ideas and illogical interpretations. That being said, some observers, journalists, analysts, and bankers (including yours truly) did perceive the looming crises. The warning bell rang when the issue of willful defaulters and excessive non-performing loans of BFIs popped up in 2006. What next? The existing banking and liquidity crisis is not the usual yada yada about the banking sector troubles and refinancing schemes. It is much more serious than that. Some of the troubled BFIs will go belly up in the coming days and some will find ways to merge with others. There might be runs on some of the struggling BFIs when depositors lose confidence on them. Lets us be clear that repeated introduction of refinancing facilities will not resolve the recurrent problem; it will only defer the inevitable restructuring of the entire banking sector. Meanwhile, one way or the other, the costs of such refinancing facilities will have to be paid by taxpayers. It is tantamount to bailing out troubled BFIs who got into the mess due to their own incompetence, not due to the public’s desire to withdraw deposits and invest in commodities like gold and silver, and durables. For the short term, the NRB should use all its tools to increase liquidity so that anxious depositors are calmed down. This should be followed by concrete steps to consolidate our banking system. I think Nepal should have something like a “Troubled BFI Relief Program.” It could be a powerful body within NRB whose main purpose would be to rescue and restructure troubled BFIs so that the problem is not systemic, and depositors are not induced to run on banks. It should bail out depositors, but not sinking BFIs. Moreover, it could be given the authority to sell assets, change management, force merger or acquisition, and hold the majority of shares of troubled BFIs until they return to a healthy state. It would consolidate the banking sector, and potentially lead to fewer but healthier BFIs that are innovative in providing services to the public, and also not take excessive risks to derail the entire economy. Published in The Week, Republica, June 17, 2011, p.6] There economic impacts of M-Pesa, a mobile phone based money transfer system in Kenya that commenced operation in 2007. Here is the full paper Isaac Mbiti and David N. Weil (2011). In a paper prepared for the Cambridge conference commemorating the 75th anniversary of the publication of The General Theory of Employment, Interest and Money, Krugman argues that “What matters is what we make of Keynes, not what he ‘really’ meant.” I’d divide Keynes readers into two types: Chapter 12ers and Book 1ers. Chapter 12 is, of course, the wonderful, brilliant chapter on long-term expectations, with its acute observations on investor psychology, its analogies to beauty contests, and more. Its essential message is that investment decisions must be made in the face of radical uncertainty to which there is no rational answer, and that the conventions men use to pretend that they know what they are doing are subject to occasional drastic revisions, giving rise to economic instability. What Chapter 12ers insist is that this is the real message of Keynes, that all those who have invoked the great man’s name on behalf of quasi-equilibrium models that push this insight into the background, from John Hicks to Paul Samuelson to Mike Woodford, have violated his true legacy. Part 1ers, by contrast, see Keynesian economics as being essentially about the refutation of Say’s Law, about the possibility of a general shortfall in demand. And they generally find it easiest to think about demand failures in terms of quasi-equilibrium models in which some things, including wages and the state of long-term expectations in Keynes’s sense, are held fixed, while others adjust toward a conditional equilibrium of sorts. They draw inspiration from Keynes’s exposition of the principle of effective demand in Chapter 3, which is, indeed, stated as a quasi-equilibrium concept: “The value of D at the point of the aggregate demand function, where it is intersected by the aggregate supply function, will be called the effective demand”. For what it’s worth, I’m basically a Part 1er, with a lot of Chapters 13 and 14 in there too, of which more shortly. Chapter 12 is a wonderful read, and a very useful check on the common tendency of economists to assume that markets are sensible and rational. But what I’m always looking for in economics is intuition pumps – ways to think about an economic situation that let you get beyond wordplay and prejudice, that seem to grant some deeper insight. Krugman takes on some of the critics of Keynes and how they distort his message. Here’s Robert Barro (2009): “John Maynard Keynes thought that the problem lay with wages and prices that were stuck at excessive levels. But this problem could be readily fixed by expansionary monetary policy, enough of which will mean that wages and prices do not have to fall.‖And if that’s all that it was about, the General Theory would have been no big deal. But of course, it wasn’t just about that. Keynes’s critique of the classical economists was that they had failed to grasp how everything changes when you allow for the fact that output may be demand-constrained. They mistook accounting identities for causal relationships, believing in particular that because spending must equal income, supply creates its own demand and desired savings are automatically invested. And they had a theory of interest that thought solely in terms of the supply and demand for funds, failing to realize that savings in particular depend on the level of income, and that once you take this into account you need something else – liquidity preference – to complete the story. Here’s Chicago’s John Cochrane (2009): “First, if money is not going to be printed, it has to come from somewhere. If the government borrows a dollar from you, that is a dollar that you do not spend, or that you do not lend to a company to spend on new investment. Every dollar of increased government spending must correspond to one less dollar of private spending. Jobs created by stimulus spending are offset by jobs lost from the decline in private spending. We can build roads instead of factories, but fiscal stimulus can’t help us to build more of both. This is just accounting, and does not need a complex argument about “crowding out.”” That’s precisely the position Keynes attributed to classical economists – “the notion that if people do not spend their money in one way they will spend it in another”. And as Keynes said, this misguided notion derives its plausibility from its superficial resemblance to the accounting identity which says that total spending must equal total income. Here’s Niall Ferguson (in Soros et al 2009): “Now we’re in the therapy phase. And what therapy are we using? Well, it’s very interesting because we’re using two quite contradictory courses of therapy. One is the prescription of Dr. Friedman—Milton Friedman, that is —which is being administered by the Federal Reserve: massive injections of liquidity to avert the kind of banking crisis that caused the Great Depression of the early 1930s. I’m fine with that. That’s the right thing to do. But there is another course of therapy that is simultaneously being administered, which is the therapy prescribed by Dr. Keynes—John Maynard Keynes—and that therapy involves the running of massive fiscal deficits in excess of 12 percent of gross domestic product this year, and the issuance therefore of vast quantities of freshly minted bonds. “There is a clear contradiction between these two policies, and we’re trying to have it both ways. You can’t be a monetarist and a Keynesian simultaneously—at least I can’t see how you can, because if the aim of the monetarist policy is to keep interest rates down, to keep liquidity high, the effect of the Keynesian policy must be to drive interest rates up.” “After all, $1.75 trillion is an awful lot of freshly minted treasuries to land on the bond market at a time of recession, and I still don’t quite know who is going to buy them. It’s certainly not going to be the Chinese. That worked fine in the good times, but what I call “Chimerica”, the marriage between China and America, is coming to an end. Maybe it’s going to end in a messy divorce.” What’s wrong with this line of reasoning? It’s exactly the logical hole Keynes pointed out, namely that the schedules showing the supply and demand for funds can only be drawn on the assumption of a given level of income. As Hicks told us – and as Keynes himself says in Chapter 14 – what the supply and demand for funds really give us is a schedule telling us what the level of income will be given the rate of interest. That is, it gives us the IS curve …, which tells us where the central bank must set the interest rate so as to achieve a given level of output and employment. […] it’s possible that the interest rate required to achieve full employment is negative, in which case monetary policy is up against the zero lower bound, that is, we’re in a liquidity trap. That’s where America and Britain were in the 1930s – and we’re back there again. Which brings me back to the argument that government borrowing under current conditions will drive up interest rates and impede recovery. What anyone who understood Keynes should realize is that as long as output is depressed, there is no reason increased government borrowing need drive rates up; it’s just making use of some of those excess potential savings – and it therefore helps the economy recover. To be sure, sufficiently large government borrowing could use up all the excess savings, and push rates up – but to do that the government borrowing would have to be large enough to restore full employment! The OECD-FAO Agricultural Outlook 2011-2020 says that a good harvest in the coming months should push commodity prices down from the extreme levels seen earlier this year. However, the Outlook states that over the coming decade real prices for cereals could average as much as 20% higher and those for meats as much as 30% higher, compared to 2001-10. These projections are well below the peak price levels experienced in 2007-08 and again this year. The Outlook notes that “agricultural commodity prices in real terms are likely to remain on a higher plateau during the next decade compared to the previous decade. Prolonged periods of high prices could make the achievement of global food security goals more difficult, putting poor consumers at a higher risk of malnutrition.” Global agricultural production is projected to grow at 1.7% annually, on average, compared to 2.6% in the previous decade. Slower growth is expected for most crops, especially oilseeds and coarse grains, which face higher production costs and slowing productivity growth. Growth in livestock production stays close to recent trends. Despite the slower expansion, production per capita is still projected to rise 0.7% annually. Per-capita food consumption is expected to expand most rapidly in Eastern Europe, Asia and Latin America, where incomes are rising and populations growth is slowing. Meat, dairy products, vegetable oils and sugar should experience the highest demand increases, according to the report. Global production in the fisheries sector is projected to increase by 1.3% annually to 2020. This is slower than growth over the previous decade, due to reduced or stagnant capture of wild fish stocks and lower growth rates in aquaculture, which underwent a rapid expansion over the 2001-2010 period. By 2015, aquaculture is projected to surpass capture fisheries as the most important source of fish for human consumption, and by 2020 should represent about 45% of total fishery production, including non-food uses. Higher prices for commodities are being passed through the food chain, leading to rising consumer price inflation in most countries. This raises concerns for economic stability and food security in some developing countries, with poor consumers most at risk of malnutrition, the report says. Increase in biofuel production: Biofuel use will continue to represent an important share of global cereal, sugar and vegetable oil production over the Outlook period. By 2020, 12% of the global production of coarse grains will be used to produce ethanol compared to 11% on average over the 2008-10 period. 16% of the global production of vegetable oil will be used to produce biodiesel compared to 11% on average over the 2008-10 period and 33% of the global production of sugar compared to 21% on average over the 2008-10 period. Over the projection period, 21% of the global coarse grains production’s increase, 29% of the global vegetable oil production’s increase and 68% of the global sugar cane production’s increase are expected to go to biofuels. It seems like Nepal is going to have food surplus (of 110,000 tonnes) this fiscal year (2010-2011), according to the Ministry of Agriculture and Cooperatives (MoAC). Meanwhile, the number of food deficit districts has gone down to 38 form 43 reported earlier. Total production, demand, and surplus were 8.615 million tonnes, 5.4 million tonnes, and 110,000 tonnes respectively. The calculation is based on the consumption rate of 191 kg per person per year by 28.376 million people. Dang, Dhanusha, Chitwan, Sankhuwasabha, Kaski and Dolpa districts have become food surplus districts this fiscal year. Dolpa has become a food surplus district after 10 years, according to the MoAC. Among the districts with food deficit production are six districts in the Tarai, 11 in mountains, and 21 in hills. According to the MoAC extension of agro technology, improved seeds and increased area under cultivation among other advantages had boosted production. The overall food grain (rice, maize, wheat, millet, barley and buckwheat) output grew 11 percent in the current fiscal year. Nepal imported 290,000 tonnes of food this fiscal year. This was published in Republica daily. Here is a detailed discussion on the same issue. Core of banking crisis in Nepal The depositors in the banking sector are worried about the course of its future, while the borrowers are anxious about arbitrary increase in lending rates, forcing them to incur an unexpected increase in the cost of production. The bankers are worried about possible run on their bank and an increase in defaults. The government and Nepal Rastra Bank (NRB) are scurrying to avert a ‘Lehman moment’ in the Nepali banking industry. A thick cloud of uncertainty, impuissance, vested self-interests, and a lack of leadership is hovering over the banking industry in Nepal, whose soundness largely determines credit flows and monetary stability in the nation. Since all stakeholders pretty much have vested interests in the banking industry, they are finger pointing at each other while dodging the blame pointed at them. The core of the problem is the fact that we have too many banks and financial institutions (BFIs) unhealthily competing for the same customer base without innovation and adequate research. The Nepali banking industry has to go back to oligopoly which is characterized by few banks but many depositors and borrowers market structure if things are to get normal. At present there are over 295 BFIs including 31 commercial banks, 78 development banks, 79 finance companies and 18 microfinance institutions. In 1983 and 1993 there were two and eight commercial banks respectively, and by January 2006 there were 17 BFIs including joint ventures. Meanwhile, there were four development banks in 1993 which swelled to 29 in 2006. Finance companies came into existence in 1992 and, by January 2006, they numbered 63. This unnatural growth not justified by our economic fundamentals has come about without a proportional increase in depositor base. Note that a 2006 study on financial penetration shows that only 26 percent of households in Nepal have bank accounts. You might be wondering what the problem is if economy has many BFIs. Well, this is the root cause for an existing liquidity crunch and an impending financial disaster for which the country seems to be awfully unprepared. Just on the basis of capital requirements the central bank has allowed too many financial institutions to pop up. Each successive year BFIs were given license to operate without considering the market condition. Businessmen and corporate houses established BFIs under their own brand names. Similarly development banks and finance companies were established without differentiation in services offered, regional operation, and customer base. Opening a BFI became a lucrative business for many businessmen and corporate houses. Instead of borrowing money from established financial institutions, they used money from depositors to finance their own investments and encouraged many investors with doubtful creditworthiness to take out loans to invest in real estate and housing. Meanwhile, with hopes of landing on a lucrative private sector career, near-retiring officials at the NRB and Ministry of Finance (MoF) turned a deaf ear to the need for strong supervision. It led to mushrooming of BFIs in the country without commensurate strengthening of regulatory and supervisory capabilities. Our policymakers and regulators created a banking bubble. A large number of BFIs and limited depositor base meant nasty cut-throat and unhealthy competition in the banking sector. The BFIs courted and coaxed the same institutional, government and individual depositors to park money at their institution by offering unusually high interest rates. In fact, there was, and is, an informal war among the BFIs to offer high interest rates on deposits. It comes with a pressure to adequately reward the depositors and shareholders in time. As there were limited investment opportunities due to prolonging political instability, the BFIs pumped a large quantity of money in a few sectors, mainly real estate and housing, from where quick return seemed highly probable. In effect, the BFIs created a bubble in these sectors. With easy loans from BFIs and increasing inflow of remittance, some agents deliberately jacked up prices each day, and hedged and speculated multiple times on the same piece of land and house. It is a tragedy that policymakers created a banking bubble and the BFIs created real estate and housing bubbles. Alas, this bubble is losing air right now and is putting the BFIs in the red as they are unable to recover loans, especially the junk and subprime ones. The BFIs (B and C category) are low in cash to payback depositors. The inter-bank lending rate is as high as lending rates of BFIs. The situation is worsening so much that the BFIs themselves are hesitant to lend each other any amount of money. The high number of BFIs and the ensuing cut-throat competition to meet profit targets and to dole out more loans means that there is a need for more liquidity than that which is normally warranted by the market. This is compounded by the failure of subprime borrowers to honor interests and principals on time, mainly due to decreasing real estate and housing prices. Unfortunately, it is leading to a situation whereby BFIs are giving more loans in order to enable borrowers to payback previous loans. Without progressive changes in banking fundamentals there is a need for higher liquidity just to float the BFIs from sinking, thanks to their own risky loan portfolios. The otherwise normal liquidity situation is made worse by sheer multiplication of the number of BFIs along with unsustainable and unhealthy competition. Our financial market is in a vicious cycle and a deadly crash course. Hate it or love it, the policymakers have to let fledging BFIs file bankruptcy and initiate due process for liquidation. No doubt, there will be pain, but moving in the process of consolidation of BFIs is the need of the hour. The rampant adverse selection and moral hazards prevalent in the banking sector has to go with a decrease in the number of BFIs. Evidence shows that countries that had few BFIs with strong regulatory and supervisory capabilities like Canada and Australia escaped the financial crisis pretty much unharmed. Few strong BFIs and strengthened regulations and supervisory bodies are in the national interest of Nepal. This will eradicate unhealthy competition to some extent and foster innovation as well. At present too many BFIs are competing with each other to attract the same depositors leaving little or no room for R&D and innovation. The core of the problem won’t just magically vanish by simply brining out refinancing facilities time and again. Nepal has to let go troubled BFIs and force mergers of BFIs with questionable balance sheets. This has to happen through a new program dedicated to looking after troubled BFIs. Or else, bankers will continue to gamble with the depositor’s money as long as they can. In a sensitive sector like banking, a rush for short term profitability over long term viability and sustainability signals disaster for the entire economy. [Published in Republica, 2011-06-15, p.6] Free trade agreements lead to a rise in bilateral trade regardless of whether the signatories are developed or developing countries. Furthermore, the percentage increase in bilateral trade is higher for South-South agreements than for North-South agreements. In this paper, the results are robust across a number of gravity model specifications in which the analysis controls for the endogeneity of free trade agreements (with bilateral fixed effects) and also takes account of multilateral resistance in both estimation (with country-time fixed effects) and comparative statics (analytically). The analytical model shows that multilateral resistance dampens the impact of free trade agreements on trade by less in South-South agreements than in North-South agreements, which accentuates the difference implied by the gravity model coefficients, and that this difference gets larger as the number of signatories rises. For example, allowing for lags and multilateral resistance, a four-country North-South agreement raises bilateral trade by 53 percent while the analogous South-South impact is 107 percent. Full paper by Behar and Criville (2011) This blog post is adapted from Justin Lin’s paper (New Structural Economics) that outlines a framework for sustainable growth strategies for developing countries. Here is a bit more detailed discussion and the source of this blog post. The Nepal Rastra Bank, Nepal’s central bank, acting as a lender of last resort, extended short-term loan of Rs 500 million to the troubled Vibor Development Bank. This is the latest saga of troubled banks in Nepal. Earlier, six BFIs landed were in the red: Gorkha Development Bank, Samjhana Finance, United Development Bank, Nepal Share Markets, Nepal Bangladesh Bank, and Nepal Development Bank were in trouble. The central bank liquidated Nepal Development Bank, restructured Nepal Bangladesh Bank, and is taking corrective management measures in others. These kinds of episodes are going to pop up again if decisive measures are not taken soon. Status of bank and financial institutions (BFIs) There are over 295 BFIs, including 31 commercial banks, 78 development banks, 79 finance companies and 18 microfinance institutions. While deposits at commercial banks stand at around Rs 642 billion (as of April 2011), development banks and finance companies have deposits around Rs 56 billion and 67 billion respectively (as of mid-July 2009). Loans and advances of development banks stand at Rs 52 billion and that of finance companies at 70 billion (as of mid-July 2009). As of April 2011, the estimated total deposit in commercial banks was Rs 642 billion. Of this demand deposits, savings deposits, and fixed deposits account for 12%, 36%, and 52% respectively. The commercial banks have borrowed Rs 15.8 billion. They have liquid funds of Rs 114 billion (cash in hand is just 16.2 billion and deposits with NRB Rs 39.3 billion). Meanwhile, loans and advances of commercial banks stand at Rs 655 billion. Of this claims on government and on private sector account 12.7% and 84.3% respectively. Commercial bank’s deposit rate ranges from 2-12 percent as of April 2011, and loan from 7-18 percent. Interbank transaction rate is as high as 10.2 percent. Over 72 percent of commercial bank’s credit flows against fixed assets. Lending to land and buildings sector account for over 58 percent of total loans. Total loans was around 52 percent of GDP (at producer’s current prices) as of mid-July 2009. ------ What is the problem? There is liquidity crunch in the market. Interest on inter-bank lending has been above 10 percent. Overall, over 50 percent of total loans is going to land and housing sector. This is a huge risk. Loan portfolio of the BFIs is in terrible shape, with concentration in a few sectors. As the number of BFIs multiplied unnaturally (it was not matched by the growth rate of customer base--according to a 2006 survey, only 26% of households have bank account), there was and is intense competition to entice individual, institutional and government deposits. This means that there is an informal war of offering high interest rates on deposits. Many outlandish deposit schemes were invented. The Nepal Banker’s Association (NBA) even tried to cap interest rates with a “gentlemen's agreement”. Meanwhile, loan was doled out to few sectors as there wasn’t (and isn’t) much investment opportunities. Since deposit rates were already high, the lending rates had to be higher to make up for ever-increasing profit target. This was assuaged by NRB’s easy monetary policy, lax supervision (by near-retiring officials who had expectations of moving into private sector banking) and inflow of remittances, which is approximately one-fourth of GDP right now. Easy loans and financing measures led to real estate and housing bubbles in urban centers. But, real estate bubble started to lose air since the end of last year. Borrowers could not payback interest and principal in time, which meant increase in lending interest rates as penalty and doling out more new loans to pay previous loans. The BFIs are in trouble because each time they had to provide additional loans to cover up previous interest and principal payments. At some point there won’t be enough deposits and money circulating around to dole out new loans to cover up previous ones. Profits get squeezed and depositors can’t get their own money when bank’s vaults are empty. Thus there is (and will be) a crisis, whose cause is perceived to be liquidity crunch instead of fundamental mismatch among deposits, lending, risk management and available stock of money. In principal, there was both adverse selection and moral hazard. First, since lending interest rate is too high, the pool of borrowers are always those that play with high risk. So, BFIs lent money to a lot of borrowers without assessing if they can payback loans to the banks. This was a gamble they played because of their incompetence and lack of banking knowledge (especially board of directors and management who ran after short term profits against long term viability). Second, after the loan was given on certain terms and conditions, borrowers simply reneged on those. The BFIs cannot control that. Borrowers simply default if things get nasty. Also, some borrowers were simply not able to payback due to decline in real estate and housing prices. BFIs mushrooming in Nepal The initiation of formal banking system in Nepal commenced with the establishment in 1937 of Nepal Bank Limited (NBL), the first Nepalese commercial bank.The country's central bank, Nepal Rastra Bank (NRB) was established in 1956 by Act of 1955, after nearly two decades of NBL’s existence. A decade after the establishment of NRB, Rastriya Banijya Bank (RBB), a commercial bank under the ownership of the Government of Nepal was established. After the financial liberalization in the 80s, a third commercial bank in Nepal, or the first foreign joint venture bank, was set up as Nepal Arab Bank Ltd( now called as NABIL Bank Ltd ) in 1984. Following this , two foreign joint venture banks, Nepal Indosuez Bank Ltd (now called as Nepal Investment Bank) and Nepal Grindlays Bank Ltd (now called as Standard Chartered Bank Nepal Ltd.) were established in 1986 and 1987 respectively. In 1983 and 1993 there were two and eight commercial banks respectively, and by January 2006 there were 17, including joint ventures. There were 4 development banks in 1993, which swelled to 29 in 2006. Finance companies came into existence in 1992 and by January 2006, they numbered 63. Now, there are over 295 BFIs, including 31 commercial banks, 78 development banks, 79 finance companies and 18 microfinance institutions. This is like Nepali BFIs on steroids and the NRB being its doctor just waited to cure the disease instead of preventing it from happening at the first place. What about delay in development expenditure? Since fiscal budgets have been coming out late for two years now, there has not been proper and normal flow of money from MoF and other ministries to the respective corners of the country via the banks. It is reducing liquidity in banking system. But, this itself is not a prime cause of liquidity crunch. This is a minor stimulant to the liquidity problem. We simply have way too many BFIs catering to too few customers, meaning that in order to survive and meet higher profit targets, they have to have constant flow of money from all sources that also in HIGHER proportion than previous flows. The problem largely is of the BFIs themselves, not the delay in budget and development expenditures. What about the NRB? The NRB definitely made a mistake initially by letting way too many BFIs pop up and by not complementing this with strengthening of regulatory and supervisory capabilities. It was already too little, too late when it started clamping down on the errant BFIs and correcting the course of the banking system. That being said, credit has to be given to the present governor Dr. Yuba Raj Khatiwada for his active and decisive role in righting the deviants. Why is it happening now? Because of cutthroat and dirty competition. There are too many BFIs (some A category banks are too big given their loan portfolio) and not a proportional increase in depositor base and investment opportunities. High profit targets meant that lending rates shot up the roof (that also arbitrarily jacking up rates via SMS and phone calls) and loans were doled out without properly assessing creditworthiness. The main source of income for BFIs is real estate and housing sector loans. Loans were doled out without properly differentiating junk and subprime loans from not-so-risky loans. Loan and risk portfolios of BFIs were and are not adequately diversified. But, real estate and housing sectors are cooling off right now, especially in major urban centers. Borrowers are finding difficult to honor interest and principal in time. The BFIs are seeing squeeze in profits, making shareholders and board of directors angry for not meeting profit targets. Already, inter-bank lending is close to the mean of various lending rates. The BFIs with limited deposits but excessive exposure to one or two sectors are feeling the heat as big banks with comfortable deposits and loan portfolios are refusing to lend them more money. Hence, the crisis that was bubbling underneath is surfacing, unnerving the banking sector and the NRB. The failure to borrow money from banks themselves despite high inter-bank rates is acute now, and the big institutional depositors are pulling money out of B and C category BFIs and putting them in A category banks. This happened at the same time and is the problem is precipitating now. This was to happen sooner or later. Were we warned before? Yes. The warning bell rang when the issue of willful defaulters and excessive NPL popped up in 2006. Then came successive banking fiascos with excessive risk taking and liquidation of Nepal Development Bank (in fact, NDB’s financial position was a headache a decade before it was liquidated). Then came the ceiling of salary of CEOs and real estate loans. It was followed by a warning about the impending financial disaster. The NRB knew it better than anyone else. But, it still waited too long to take decisive action. Now, the governor is showing strong resolution to tackle this issue. There will be pains in BFIs but ultimately gains to the country, if corrective actions are taken. What have the central bank and government done so far? It liquidated Nepal Development Bank and forced management changes and restructuring in couple of other troubled banks. It extended Rs 500 million loan against good loans and assets of Vibor. It capped real estate and housing loans. It regulated salary of CEOs to dampen excessive risk taking. Now, it has opened a special refinancing facility for 120 days with 7 percent interest rate (below the inter-bank lending rate). The commercial banks, development banks and finance companies can now receive refinancing facility up to 60 percent of their core capital to manage liquidity. Previously, the central bank was providing refinancing (up to 40 percent of core capital) only to facilitate lending in the productive sector at lower interest rate. In 2006, major commercial banks were rattled by loan defaults, especially by big business groups and businessmen. Six banks identified 80 businessmen that had defaulted Rs 12 billion. They were blacklisted and various measures were taken to recover loans. Is this enough? No, it is not. The latest moves by the central bank is geared toward restoring market confidence and to calm down worried depositors, whose increasing anxiety might lead to run on of not only fragile BFIs, but also banks with strong deposit and loan portfolio management. The latest NRB move is just a band aid to a deeper problem. Such refinancing, whose ultimate guarantor is the taxpayer if the central bank fails to recover loans, is going to, hopefully, avert systemic risk posed by the failure of a handful of B and C category financial institutions. The core of the problem is that Nepal has way too many BFIs, which mushroomed like malls around the country.This came without a proportional increase in depositors base (according to a 2006 survey, only 26% of households have bank account). It meant cutthroat competition to entice the same customers (depositors and borrowers) nastily and disastrously playing with interest rates. What is the solution? I think short term refinancing schemes are not going to solve the core problem. Nepal will see many BFIs (especially B, C and D categories) going belly up in the coming days. This might be systemic and could engulf even the BFIs with healthy balance sheets. There are too many junk and subprime loans in the banking sector. Risks are not adequately diversified. It is a recurrent problem and is going to resurface within weeks of dry up of refinancing facilities. The Nepali banking sector needs a clean up and the janitor cannot be BFIs themselves who mistakenly believe that a refinancing would give them a chance to restructure their loan portfolio within a quarter; it has to be the NRB and the MoF. The existing banking problem is not the usual yada yada about the banking sector troubles and refinancing schemes. It is much more serious than that. I think Nepal should have something like ‘Troubled BFI Relief Program’. It should be a unit under the NRB and the MoF with initial capital equivalent to total loan of BFIs in the two most exposed sectors or the total value of junk and subprime loans of BFIs. The NRB and government should chip in 90 percent and the BFIs 10 percent to the fund (may be it can be taxed on such loans; the source and amount of fund for this program has to be adequately discussed as it might be equivalent to half the annual fiscal budget if it is made equivalent to the amount of loan in the two most exposed sectors). The main purpose would be to rescue and restructure troubled BFIs so that the problem is not systemic and depositors are not induced to run on a bank. If troubled BFIs seek help from the NRB or the government, then they should be directed to use the facilities provided through this program. When they do, they will be forced to undergo structural changes. The program could have authority to sell assets, change management, force merger or acquisition, hold majority of shares until it returns to a healthy state, and so on AFTER the BFIs knock on its doors for assistance. It should eventually lead to fewer and healthy BFIs (note that oligopolistic competition in the banking industry fosters stability and innovation) and averting a situation where profits are private but losses are social.The program can be made profitable if designed and operated properly. It won’t and shouldn’t be a burden to taxpayers. A program like this one is needed because the NRB cannot simply extend loans and refinancing at the expense of taxpayers’ money and by increasing money supply. Meanwhile, the BFIs also cannot inflict damage to third party due to their own shortcomings. This could be a permanent solution to the recurring problem. It should last as long as the BFIs and banking system are not cleaned. Later on it could be given more teeth such as supervisory or advisory role on fine-tuning of banking sector. Unless a program like this is created Nepal will continue to see troubled BFIs and worried depositors anxious to pull their deposits out of the banks and purchase commodities like gold and silver. The refinancing schemes cannot solve the recurrent problem. Sounds like a crazy idea, but something like this is needed in Nepali banking sector. We can’t afford to play cat-and-mouse game time and again. The Nepal Rastra Bank, Nepal’s central bank, acting as a lender of last resort, extended short-term loan of Rs 500 million to the troubled Vibor Development Bank. The bank itself asked for either a liquidity injection or management takeover by the central bank just two days ago. NRB has instructed Vibor to take a number of corrective actions such as appointment of separate individuals as chairman and chief executive; to send VBB into forced merger and asked it to sign a merger MOU with some other financial institution within the next three months; to downsize staff; to not offer salary to executive chairman until the bank is reformed; and to reform within one-and-a-half month and pay loan within six months. Along with agreeing to these set of tough conditions, the troubled VBB has pledged a number of collaterals for the loan, including good loans worth Rs 700 million and a plot of land worth Rs 350 million at Kamalpokhari, according to media reports. Vobor’s deposits presently stand at around Rs 3.06 billion, whereas its loans and advances total Rs 2.26 billion; real estate loan amounts to Rs 1.40 billion. It has investments in about half a dozen assets-related projects. This is the latest saga of troubled banks in Nepal. Earlier, six BFIs landed in red: Gorkha Development Bank, Samjhana Finance, United Development Bank, Nepal Share Markets, Nepal Bangladesh Bank, and Nepal Development Bank were in trouble. The central bank liquidated Nepal Development Bank, restructured Nepal Bangladesh Bank, and is taking corrective management measures in others. I will post detail discussion about state of Nepali banking sector in later posts. In yet another spate of financial turmoil, Vibor Bikas Bank (VBB) -- a national level development bank -- has become the latest financial institution to seek emergency management takeover by the central bank, Nepal Rastra Bank (NRB) to avert a looming financial meltdown. A delegation of Nepal Bankers Association and Vibor Bank´s CEO Ajaya Ghimire formally approached two Deputy Governors of NRB Gopal Kafle and Maha Prasad Adhikari on Wednesday and requested for management takeover. Refusing to take over the troubled bank, the NRB suggested to the members of the NBA to help Vibor by resuming stalled inter-bank lending. The bankers refused to buy the idea. “The bank is seriously in crisis. Who will risk themselves by providing loans to it against land or house, which are not selling these days?” said a banker. Here is the full story. Someone named Sam Clifford is placing the whole blame on “acute liquidity crunch”. While Sam chides at the reporter for not checking Vibor’s balance sheet at the office, he does not deny the fact that the bank’s CEO and NBA officials knocked on the doors of NRB for help. This means, plain and simple, Vibor is in trouble right now. You can’t blame liquidity crunch to justify your imprudent investment portfolio that is putting the entire institution in troubled waters. Why are other development banks not pleading for NRB’s assistance? Why is Vibor knocking NRB’s door NOW? It is because it is in trouble and does not have confidence on its own balance sheets. No doubt. Meanwhile, this is what I wrote in January: While the latter (NRB) ignored the unhealthy development in financial sector, let new BFIs prop up without even evaluating if our economy needs so many of them, and took damage control measures of late, the former (BFI) is in desperation to survive amidst cutthroat competition, which is getting nasty by the day. The BFIs’ inability to effectively cope with the existingpressure on deposit and lending, and to attain unsustainable profit targets might lead to a situation where all profits are private but losses are social, i.e. taxpayers pay the cost of reckless behavior of few sectors in the economy. Looking at the existing business structure of the real estate and housing sector and the BFIs, it is very likely that their unjustified growth will end soon, raising fear of destabilizing not only the very conduit from where the public is facilitated with credit but also derailing the entire economy. The existing path on which these two sectors are hurtling toward bears the hallmark of the recent housing, financial, and economic crises in the West. It all starts with pumping of too much money in one sector, which after few years of unnatural and unsustainable growth crashes down and puts pressure on the BFIs, leading to defaults, extremely vulnerable financial institutions, and squeezing of credit to all sectors in general. […] The development in the housing and real estate sector and the ad hoc decisions of the BFIs do not augur well for the economy. We might end up with empty apartments and ‘ghost’ houses if things continue to go the way they are going right now. Playing with interest rates on loans and savings is just an attempt to buy time before the inevitable disaster hits the BFIs. It is good to acknowledge and rectify mistakes before it is too late. The tendency to seek short term gains over long term sustainability is a recipe for disaster with severe negative externalities, i.e. it will not only affect the BFIs, but also the public who are not a direct party to the activities of financial sector, and real estate and housing sector. Before these two sectors put the entire economy at risk, strong safeguards should be put in place. It might mean making painful decision of letting some BFIs to either fail (remember Nepal Development Bank?) or forced to merge, and help to rapidly cool down the urban-centric real estate and housing sector. I see as situation where profits are private and losses are social in the Nepali banking system. The fault squarely lies in the BFIs (and some to NRB) itself. The financial crisis will deepen further without NRB’s activism to mitigate fears and clamps down on BFI’s indiscipline to manage their own books. Expect more troubled time in the Nepali banking sector.*estimate; **revised estimate'; # Economic Survey 2010-11 
Wednesday, June 29, 2011
Two main barriers to economic integration in South Asia
more main barriers to effective trade within the region. The cross-border transport and customs infrastructure in the region is very poor. If SAFTA is to yield any result, improvement in trade infrastructure is a must. Asian Development Bank (ADB) through South Asian Sub-Regional Economic Cooperation (SASEC) has been focusing on improvement of transport infrastructure in the quadrangle of Bhutan, Bangladesh, India and Nepal but the actual move on critical infrastructure has been slow.
Saturday, June 25, 2011
Can you separate the WTO from the Doha Round?
Thursday, June 23, 2011
Update on the state of labor market in Nepal
Meanwhile, there are 0.21 million child workers working in legally prohibited sectors. The sector-wise distribution is as below:
Tuesday, June 21, 2011
Nepal's banking and liquidity crises explained
M-Pesa versus Western Union: Mobile banking increases competition and consumer benefits in Kenya
Monday, June 20, 2011
Krugman on Keynes and his message
Friday, June 17, 2011
Agricultural outlook for this decade
Drivers of price volatility:
Update on food security in Nepal (2010-11 is surplus year)
Food balance in FY 2010-11 (tonnes) Region District Production Requirement Food balance Mountain 16 333875 383327 -49452 Hills 38 2256322 2457399 -201077 Terai 21 2922678 2521516 401162 Total 75 8.615 million tonnes 5.4 million tonnes 110000 tonnes
Thursday, June 16, 2011
Core of banking crisis in Nepal: BFIs bubble & real estate and housing bubble
Tuesday, June 14, 2011
Impact on bilateral trade: North-South vs. South-South trade agreements
Monday, June 13, 2011
New Structural Economics
This could be done using value chain analysis or the Growth Diagnostic Framework suggested by Hausmann, Rodrik, and Velasco (2008). The government can then implement policies to remove the constraints at home, and carry out randomized controlled experiments to test their effectiveness in eliminating the constraints before scaling those policies up to the national level.
Saturday, June 11, 2011
State of Nepali banking system & a case for new BFI relief program
Vibor Development Bank gets rescued
Thursday, June 9, 2011
Vibor Development Bank is in trouble