Wednesday, May 30, 2018

Quick thoughts on Nepal’s FY2019 budget

Here are my quick thoughts on FY2019 budget.

On 29 May 2018, Finance Minister Dr. Yuba Raj Khatiwada presented FY2019 budget (mid-July 2018 to mid-July 2019) to a combined session of the federal parliament. The budget is more or less in line with the left alliances’ policies and program approved by the parliament, and touches upon some of its distributive as well as pet projects mentioned in their election manifesto. 

This budget and the targets set in it form the basis to evaluate the government’s progress in the coming years. Considering this claim and the strong position of Nepal Communist Party (NCP) at all the three tiers of government— especially with respect to its ability to usher in transformative projects as well as reforms, and change the nature of budget making—, it is a disappointment fiscal plan. That said, good things about the budget are that it focuses heavily on infrastructure development, plugging revenue leakages, and implementation of federalism. 

The budget is unique in four ways:

First, for the first time, grants to provincial and local governments consist of revenue sharing as mandated by the constitution, NNRFC Act, and Intergovernmental Fiscal Management Act. The central government needs to share 30% of VAT and excise duty (15% each to local and provincial governments) mobilized in a given year. Similarly, it has to share 50% of royalties generated from natural resources (mountaineering, electricity, forests, mines and minerals). In addition, on expenditure side, it categorically allocates fiscal equalization and conditional as well as unconditional grants. 

Second, compared to FY2018 budget, the total budget outlay is not increased by much given that the central government needed to share about 12% of projected revenue mobilization with provincial and local governments. This along with an outsized FY2018 budget bound the government’s hands. However, compared to FY2018 revised estimate, total budget outlay has been increased by 25.7%. 

Third, it focuses on controlling revenue leakages, agricultural development, tourism, and infrastructure development, especially pushing forward with preparatory work for large-scale projects, development of sports facilities, hospitals and industrial estates. However, the finance minister has squandered an opportunity to change the course of budget-making, especially by including numerous pet projects that are of populist nature; allowing the parliamentarians to have a say over project selection (NRs40 million for each federal constituency), which makes them project managers rather than lawmakers; spreading grants and subsidies too thin across too many sectors; and not rolling out private-sector specific reform or incentive measures. In effect, expenditure rationalization and fiscal prudence are mildly adhered to, but could deteriorate fast if revenue mobilization falls short of the target. 

Fourth, there is hardly any concrete reform plan to reinvigorate private sector; a time-bound implementation framework is missing (usual MOF directives to speed up spending won’t cut it); and GDP and revenue growth targets are ambitious. The budget looks like a continuation of previous structure of budget, not a departure from it considering the high hopes people had from a finance minister with technocrat-cum-policy making background

More on these later, but first let’s look at the macroeconomic specifics:

Budget outlay

The total expenditure outlay for FY2019 is NRs1315.2 billion (an estimated 38.7% of GDP), which is 25.7% higher than the revised expenditure estimate for FY2018. The government expects to spend 81.8% of NRs1279 billion allocated in FY2018. 

FY2019 budget overview
GDP growth target (%)

Inflation target (%)

Budget allocation for FY2018

Rs billion
Budget allocation
Financial provision

Projected total revenue
Foreign grants
Revenue sharing

Projected budget surplus (+)/deficit (-)

Projected deficit financing
Foreign loans
Domestic borrowing

FY2019 budget outlay comprises of NRs845.4 billion as recurrent expenditures (64.3% of the total outlay), NRs314 billion as capital expenditures (23.9%), and NRs155.7 billion as financial provision (11.8%). This pattern is pretty much the same as last year. 

As a share of GDP, total budget amounts to 38.7%, including just 9.2% for capital spending. As per FY2018 revised estimates, the government now expects to spend just 87.1% of planned recurrent budget and 71.2% of planned capital budget. Compared to the revised estimates, recurrent spending is up by 20.8% and capital spending by 31.6%. However, compared to FY2018 budget allocation, it is opposite: capital spending is down by 6.3% but recurrent spending is up by 5.2%. This is somewhat consistent with the finance minister’s commitment that he will reduce allocation for some non-preforming projects (especially those projects that are not ready for implementation). However, he has given continuity, under different name, to wasteful programs such as the ones run by parliamentarians. May be party politics was too overwhelming for his to resist. The government has allocated NRs151 billion for post-earthquake reconstruction.


A total revenue target of NRs945.6 billion (27.8% of GDP) has been set for FY2019, including projected foreign grants of NRs58.8 billion (1.7% of GDP). It also includes NRs114.2 billion revenue sharing with provincial and local governments. The government will share, based on monthly collections, 30% of VAT and excise duty, and 50% of royalties from natural resources with subnational governments. The revised estimate for revenue mobilization (including grants) in FY2018 is 25.4% of GDP. Compared to the revised estimate, revenue growth target for FY2019 is 29.8%, which is ambitious and was achieved just once in the last decade.  Given that the GDP growth target itself is overly ambitious, and revenue administration reforms along with tinkering of import tariff on some non-essential items have its limit in increasing import-based revenue, it needs to be seen how this government will achieve the revenue target.

Specifically, in order to achieve the high revenue growth target, the finance minister is relying on: (i) increasing excise duty on alcohol and tobacco, and mandating VAT registration for sales within metropolitan and sub-metropolitan cities; (ii) increasing excise duty on motorcycles with above 150 cc and vehicles above 1000 cc engines; (iii) increase internal taxes on sugary products and refrigerator production; (iv)  income tax slabs of 10%, 20% and 30%, and an additional 20% tax on those earning above NRs2 million taxable income annually; (v) revision of application of capital gains tax on real estate transaction (now transactions above one million— earlier it was three million— will attract CGT as well); and (vi) revenue administration reforms. 

There is some tax relief as well: no education and health services tax and VAT (in the case of private hospitals); tax concession for tourism and productive sectors on profit reinvestment, reduction of income tax by 50% on tea, clothing and dairy; and seven year income tax holiday for woman-run businesses, among others. 

Nepal’s revenue mobilization is already one of the highest among low-income countries and about 45% of it comes from taxes on imports. Tax revenue is projected to be around 21.9% of GDP in FY2018 and 24.7% of GDP in FY2019.

Deficit financing

Considering federal expenditure and its share of revenue in total revenue mobilization, the budget deficit turns out to be NRs425.8 billion, which is financed by foreign loans equivalent to NRs253.8 billion and domestic borrowing of NRs172 billion. This year the finance minister has done away with using last year’s estimated cash balance to finance expenditure. There was a tendency to bloat government savings (amount the government raised but could not spend) and use that to make a case for higher deficit financing in the previous years. The government is planning to increase net foreign borrowing by 24.7% to NRs229.4 billion (6.8% of GDP) and net domestic borrowing by 9.6% to NRs136.9 billion (4% of GDP). Overall, fiscal deficit is projected to be about 10% of GDP. Fiscal deficit is the difference between revenue including grants and expenditure including net lending. 

Where is recurrent budget going?

Almost 59% of planned recurrent budget of NRs845.4 billion is going to provincial and local governments in the form of fiscal transfer (fiscal equalization and conditional grants) and unconditional grants. This is where pet projects of politicians are usually embedded in as these grants are to cover both recurrent and capital spending at subnational level. The other big ticket item is the compensation of employees, which takes up about 13.9% of total recurrent budget. The government has earmarked NRs113.1 billion for social security spending and NRs86.8 billion for use of goods and services. Use of goods and services consists of (i) rent & services; (ii) operation and maintenance of capital assets; (iii) office materials and services; (iv) consultancy and other services fee;(v) program expenses; (vi) monitoring, evaluation and travel expenses; (vii) recurrent contingencies; and (viii) miscellaneous.

Compared to the revised estimate, the largest increase is in social security, which together with subsidies was one of the highlights of the NCP’s election manifesto and white paper.

Where is capital budget going?

Almost 54.2% of the planned capital budget of NRs314 billion is going for civil works, 22.3% for constructing building, and 32.2 for land. Compared to the FY2018 revised estimate, capital spending has been increased by 31.6%, but compared to FY2018 budget estimate, it has decreased by 6.3%. Some of this expenditure also include post-disaster related reconstruction activities. 

What about subnational governments?

The provincial and local bodies are getting NRs499.4 billion. Of this NRs190.9 billion is unconditional grants and NRs308.5 fiscal transfer, which includes fiscal equalization and conditional grants. The government is not allocating matching and special grants in the budget. The total fiscal equalization and conditional grant for the seven provincial governments is NRs113.4 billion (the largest amount NRs19.9 billion going to province one). The total fiscal equalization and conditional grant for the 753 local governments is NRs195.1 billion. Here is the breakdown for local governments:
  • Metropolitan cities: NRs6.7 billion
  • Sub-metropolitan cities: NRs8.0 billion
  • Municipalities: NRs88.3 billion
  • Rural municipalities: NRs91.9 billion 

Apart from these grants, the government is also sharing an estimated NRs114.2 billion revenue (based on monthly collections), with the subnational governments. These are substantial fiscal transfer and revenue sharing with subnational governments, which now will have to pass their own budget before the start of FY2019. Except for revenue sharing, the fiscal transfer by central government is clubbed under recurrent spending and they constitute about 59% of total planned recurrent spending. The subnational governments will be able to use the grants, without re-approval, for projects listed in the budget/Red Book.

Grants to sub-national governments
Rs billion
Total grants
Fiscal transfer
Fiscal equalization
Local bodies
Fiscal equalization

Major takeaways from FY2019 budget

First, the finance minister has tried to rationalize spending by not increasing the federal budget like in the past for two reasons: (i) a certain portion of revenue need to be shared with subnational governments; and (ii) the previous government’s bloated budget pretty much bound this government’s hands. However, like previous finance ministers, he has allocated recurrent spending more than total federal revenue (i.e, total revenue mobilization minus the portion that needs to be shared with subnational governments). Therefore, there is revenue deficit in FY2019 (likewise in FY2018 budget estimate but in revised estimate federal revenue is higher than projected recurrent spending). 

Second, a robust, credible and a time-bound implementation plan to spend the earmarked money is missing, arousing suspicion over allocative efficiency in budget allocation. The last government also promised timely budget implementation, but as it turns out barely 70% of capital budget is expected to be spent in FY2018. The core issues for chronically low capital spending (structural weaknesses in project preparation and implementation, low project readiness, bureaucratic hassle in approving and reapproving projects, poor project management and contractor capacity, high fiduciary risk in project implementation at subnational level, and political interference both at planning and operational levels) and bunching of spending in the last quarter (note that over 40% of actual capital spending happens in the last month of fiscal year) are hardly addressed in the budget. This raises doubt over timely budget execution. The Prime Minister-led project implementation committee is not a new thing as he has been fulfilling that role in the capacity of chairman of National Planning Commission, federal cabinet, Investment Board Nepal, and numerous other committees. Furthermore, empowering secretaries and project directors and amending procurement law are also not new. That said, commitment to rollout a separate law for large-scale, strategic infrastructure projects is a good thing. 

Third, the finance minister has committed adequate budget for performing projects and has allocated initial funding for project preparatory work (mainly feasibility studies) of the government’s pet infrastructure projects (railways, waterways, ropeways, etc). However, in reality budget allocation, as a share of GDP, for capital spending is decreasing. The previous two finance ministers allocated over 11% of GDP for capital spending (but actual spending is around 7.9% of GDP). This year it is just 9.2% of GDP. It signals either the government could not find new shovel-ready infrastructure projects or it just wanted to restrain spending in capital projects as well. Note that the government needs to spend at least between 8-12% of GDP in public infrastructure to bridge the infrastructure gap. 

 Fourth, the new income tax slabs ideally ensures that those earning less will be paying less taxes (10% instead of 15%) and those earning more will be paying more taxes—which makes it a progressive tax scheme. However, we need to note that in Nepal hardly one million have officially registered for VAT and income tax. The government will have to bring more people inside the tax net, for which both carrot and stick (punishment and incentives) are necessary.  

Fifth, related to the previous point, the revenue growth is too ambitious. The finance minister is aiming to increase revenue by 29.8% over revised estimate for FY2018. Revenue has not grown at or above this rate since FY2009, when Dr. Baburam Bhattarai was the finance minister. Imports began to surge with generous bank credit and high remittance inflows, leading to large increases in tax revenue, particularly trade related revenues. This time it is different, as the economy has pretty much reached its limit in terms of finding new sources for revenue growth (unless more people and businesses are brought inside the tax net). This is also the most difficult reform, which every finance minister has tried to do. 

Sixth, one argument is that 8% GDP growth target means more economic activities and hence more revenue mobilization. This is not realistic because the GDP growth target itself is unrealistic. In FY2018, the economy is projected to grow by 5.9% on the back of higher elections related spending and pick up in construction activities. However, this year despite the forecast of favorable monsoon, there won’t be extra government spending (like elections). The budget doesn’t have much to offer to the private sector expect for assurances of business-friendly regulations, which every other finance minister has done. Public capital spending will likely remain around the present level given that not much is there in the budget to tackle the core issues for chronically low capital spending. Workers’ remittance is decelerating, affecting both import-based revenue and consumer demand. Hence, GDP growth— with favorable monsoon, continuing post-disaster reconstruction works, improvements in electricity supply and manufacturing activities, and local level spending— might at best hover between 5.5% and 6.5%. 

Seventh, fiscal deficit is getting too large and this trend may jeopardize whatever sound macroeconomic balance Nepal has been having so far. It is expected to be about 7% of GDP in FY2018 and 10% of GDP in FY2019. The government is borrowing so fast in the last few years that interest payment amount has increased to about 1% of GDP. Of this, about 84% is for internal loans. Net domestic borrowing has jumped from about 2% of GDP in FY2017 to about 4% of GDP now. This means the government is raising too much money from the banking sector— exacerbating liquidity shortages, interest rate volatility and crowding out private sector. The government has nearly reached its limit in terms of how much it can borrow internally. Therefore, it is expecting very large increase in net foreign loan (from 1.5% of GDP in FY2018 to 6.8% of GDP in FY2019). This is not realistic because a major part of foreign loans (at least from the two big multilateral development banks) are on disbursement basis, which means the government needs to accelerate capital spending—an uphill task as of now.

Eight, increasing cash incentive for exports up to 5% (from current 2 to 4% based on value addition) will hardly increase exports. What Nepal needs is an improvement in price competitiveness, facilitative infrastructure, and resolution of NTBs. Cost subsidization does not necessarily result in price competitiveness. Other significant issues include:
  • There is also no basis or work plan to provide employment to 500,000 people. Loan at 5% interest against education certificate is not new (existed when KP Sharma Oli was prime minister previously). It could end up like Youth Self-Employment Fund, which after much political interference is barely operating as it was envisaged. 
  • The government also is aiming to increase tourism inflows to 1.2 million by FY2019 and 2 million by 2020— a very uphill task. So is the target of doubling agricultural output in the next five years. 
  • There is also a line on waiving source requirement if invested in national priority hydroelectricity, international airport, road network, railways, industries with 300 domestic employment, and 50% use of domestic raw materials. This is politically-motivated investment plan designed to benefit a select few associated with NCP. A similar voluntary income disclosure scheme and investment plan was launched in FY2008.
Overall, a good budget and plan compared to previous year, but it falls short on departing from the past and setting a new trend. Fiscal prudence is mildly adhered to and it’s an achievement given the temptation of communist leaders to spend without ascertaining sources. 

Sunday, May 27, 2018

Book Review: Arthat Arthatantra (अर्थात् अर्थतन्त्र)

It was published in The Kathmandu Post, 26 May 2018

Arthat Arthatantra underscores a need for an ergonomic realignment as well as for change in the economic development mindset

Economics and business books written in Nepali language for general audience are pretty rare. Sujeev Shakya—author of Unleashing Nepal, published in 2009 by Penguin Books India (revised edition in 2013)—has attempted to fill that void with his new book titled Arthat Arthatantra-Nepali Illam ra Udhyamko Yatra, published by nepa~laya. It is largely based on his English book but some updates contextualise political and socio-economic developments since 2009, offering fresh perspectives that interestingly depart from well-worn narratives.

Shakya wants readers to wear an optimistic lens when it comes to assessing economic prospects. Sometimes labelled as a Chief Eternal Optimist (CEO) for his witty newspaper articles and workshop presentations, Shakya has a particular distaste for consultants and narratives that project Nepal as one of the poorest countries inflicted with a third world economic malaise. Instead, he prods the readers to think big: Nepal is not small as it is the 94th biggest country geographically, 43rd biggest by population, and has a US$25 billion economy that has started to clock in economic growth rates of over 5%. That said, readers are reminded of six major interrelated issues that define our political economy: land ownership intertwined with political and economic power; symbiotic relationship between government agencies and non-governmental organisations; protectionist mentality; rent-seeking behaviour; perception that outsiders have forced a development strategy upon us; and large-scale out-migration for jobs. Historical and contemporary political and economic developments can be constructed around these six issues.

The book focuses on three main aspects of the Nepali economy. First, in a historical background to the current economic trends and our consumption habit, the author lays out a simple narrative of rent-seeking behaviour among politicians and the business community, which thrive on oligopolistic market that restricts competition and uses political and economic influence to protect the market share. This has been the trend since the unification of Nepal by Prithivi Narayan Shah (around the same time Adam Smith published The Wealth of Nations, in which he explained market dynamics dictated by an invisible hand). Our status as a ‘rentier state’, elitism, nationalism and outmigration for work due to sluggish economic activities have been defining features since the country’s conception.

The second section focuses on political and economic development after the people’s movement in 1990, an era characterised by an armed conflict and massive out-migration for work. That was also a time when the economy started to shift from being state-led to market-led, the credit for which goes to the then Nepali Congress-led government. There was a compulsion to liberalise the economy and divest the state’s share on lossmaking public enterprises due to economic troubles in India—which itself was liberalising and to whose currency the Nepali rupee was pegged to—and large fiscal and external sector imbalances.

This increased private sector investment in industrial and services sectors, and technology transfer facilitated communication within and outside of Nepal.  Unfortunately, this was also the time when botched management of the liberalisation process, and intra and inter party wrangling for leadership led to the emergence of stronger middlemen, an armed conflict, party-affiliated trade unions, derailing of Arun III, corruption, strikes, syndicates, remittance-dependent economy, and an erosion of the state’s capacity to implement reforms for greater public good. The development sector sprang into action reinventing the wheels of reform and development agenda, churned reports that supported their existence and often operated without much financial and government oversight. Consultancy and I/NGO jobs became the most sought after career path for new graduates. The government too relied heavily on foreign aid to finance its expenditure commitments, resulting in aid dependency. Meanwhile, the private sector survived on political patronage and the capture of sectoral business opportunities. One of its interesting outcome is the transformation of some Brahmins into ‘business tycoons’, which traditionally were from Newar and Marwari communities.

The most interesting part is in the third section, where Shakya cautions the government and public to rectify mistakes made in the past and lay the groundwork for youths to reinvigorate the economy. He underscores a need for an ergonmic realignment as well as for fundamental change in the economic development mindset if the vision of being a middle-income country and to achieve Sustainable Development Goals by 2030 is to be attained. Increasing investment and generating, as well as sharing, prosperity is essential in order to change the structure of the economy where market forces dictate demand and supply dynamics, and the government facilitates the process as well as implements targeted social protection programmes. The private sector needs to enhance efficiency, practice good corporate governance, and deliver services in an innovative way. Shakya outlines general investment reform measures in six key areas (although non-distinct), namely land, tax, capital market, financial sector, labour relations, and general economic reforms. Meanwhile, he sees opportunities in agriculture, hydropower, tourism, services, education, ICT, infrastructure development and financing, and pooling remittances for investment in productive sectors.

Readers looking for a good narrative of historical and contemporary economic and development trends and future prospects will enjoy the book. However, those looking for analytical data and causal arguments for the myriad of issues and developments over the last five decades may find themselves a bit disappointed. However, they should also keep in mind that this book is for general readers and the insights come from the author’s 30-year career in domestic and international private sector and development assignments. Some historical and economic assertions are just observations coming from the author’s decades-long experience and may sound speculative because of the lack of substantive evidence.
The book doesn’t offer a detailed diagnostics of the problem and solutions to the most pressing macroeconomic and development issues currently faced by the economy. Nor does it include much statistics, figures and causal relationships. Instead, it weaves a lucid narrative, in Nepali language, of individual, business and government’s contemporary traits and links them to our history. In that respect, the book is a pleasure reading, where the author also encourages readers to be cautiously upbeat about future prospects.

Saturday, May 26, 2018

Arun-3 hydroelectricity project: Return of the damn plan

It was published in The Kathmandu Post, 25 May 2018

The Arun 3 saga is a case of squandered opportunities and politics before progress

On May 10, Prime Minister KP Sharma Oli and his Indian counterpart Narendra Modi remotely laid the foundation stone for the Arun 3 hydroelectricity project. This 900 MW mega project located in Sankhuwasabha district is unlike any other infrastructure project the country has seen so far. Its significance in terms of total electricity generation, free supply to Nepal, export to India, revenue generation and boost to local economic activities is immense. The scale of the proposed investment and required work is so large that it will take some time for people to appreciate its transformative nature in terms of potential to boost economic growth and job creation.

Looking back

Ironically, Arun 3 is also one of the most contested hydropower projects in Nepal, especially owing to non-governmental activism and the buy-in of exaggerated logic by the CPN-UML which has now merged with the Maoist Centre to form the Nepal Communist Party (NCP). The Arun 3 saga is a glaring example of opportunities squandered due to INGO and NGO activism and the communist government’s giving priority to politics over development. As per the agreement signed between Investment Board Nepal (IBN) and Satluj Jal Vidyut Nigam (SJVN), an India public enterprise, in November 2014, Arun 3 should be starting production by 2020. However, its failure to financially close the project on time has pushed the project completion deadline to 2023.

The Indian government and the State Bank of India are the top financiers of the $1.5 billion project. The project has already paid Rs5 million to IBN as licence fee. Nepal will receive about Rs348 billion in revenues and Rs107 billion in royalties over 25 years, after which the project will be handed over to the government. The benefit to local communities is also appealing: 30 units of free electricity per month to affected households, 12 percent of total royalties to project affected areas, 3,000 jobs, generous resettlement scheme and development of local infrastructure.

In the early 1990s, Arun 3 was originally envisaged as a 404 MW hydroelectricity project costing $1.08 billion which multilateral and bilateral donors, led by the World Bank (WB), were ready to finance with a combination of concessional loans and grants. Rather than the project itself, the conditions for financing and project design turned out to be the most controversial. A consortium of international and domestic non-governmental organisations spearheaded the opposition camp, at times blowing allegations out of proportion with a deliberate intention to derail the project.

On August 3, 1995, the then WB president James Wolfensohn called the then prime minister Man Mohan Adhikari to inform him of the WB’s decision to not move ahead with the project. Although the WB formally pointed out three main reasons for pulling out—lack of ability to manage the complicated project, politically difficult situation to rationalise electricity tariff and prioritise public expenditure, and cost escalation due to delays—in reality it bowed to intense international and domestic pressure to abort the project. The INGO and NGO activism had tacit support of the UML which was determined to overturn a large-scale project initiated by the Nepali Congress-led government. In fact, the then UML general secretary Madhav Kumar Nepal had written to the WB threatening to review the project if his party came to power.

The hurdles

The major objection of the INGO and NGO community was over cost, corruption, environmental damage and threat to livelihoods of indigenous people. An important point to note here is that even legitimate concerns were blown out of proportion. First, Nepal needed a large-scale hydropower project to fulfil demand increasing at the rate of 40 MW annually and increase access to electricity. Achieving these aims and providing adequate energy to industries, which were just beginning to take shape following first generation reforms in 1992, were not possible with small and medium scale hydro projects as the activists had suggested. Back then, Arun 3 was identified as the most viable in terms of cost and time. In fact, to address the cost issue, it was redesigned as a two-stage project of 201 MW each.

Second, there were no absolutely binding clauses that would have barred the country from initiating other hydroelectric projects of over 10 MW. The government had convinced the donors that the expected return from Arun 3 was more than enough to service debt, and thus it could use the savings for other projects, for instance, the 144 MW Kali Gandaki project.

Third, allegations regarding corruption were nonsense because big projects need to be contracted to international contractors as domestic firms don’t have the capacity to execute them. Subsequently, they sub-contract parts of the construction work to local contractors. Fourth, the 122 km access road would not only help Arun 3, but also be beneficial for the Lower and Upper Arun hydropower projects. Fifth, there are always trade-offs in mega development projects, and Arun 3 was no exception. A well laid out safeguards plan was agreed upon to address environmental and livelihood threats to the extent possible. The activists, with the support of the UML, won the battle, forcing the WB to pull out of Arun 3. In fact, the WB stayed away from energy sector investment.

Fast forward to 2018, the same party whose disastrously opportunist stance led to the demise of Arun 3, and that subsequently exacerbated an important binding constraint to growth (adequate supply of electricity), enthusiastically promoted and facilitated clearances and approval of the project. Most of the background work was done by IBN, which deserves special appreciation for the tireless work since its establishment in 2011. 

The controversies and delays surrounding Arun 3 remain an unfortunate example of why politics should not supersede development of transformative projects. The growth and employment trajectories would have been entirely different if the construction of Arun 3 had started in 1995. Let us hope that the NCP-led government, which has a sizeable majority at all three-tiers of government, will not again fall prey to outlandish growth-regressive activism.

Monday, May 21, 2018

Interview: आर्थिक विकास र समृद्धि कर्मकाण्डी आश्वासन मात्र हो

This interview was published in Arthik Abhiyan, 20 May 2018

पछिल्लो राजनीतिक परिवर्तनयता अहिले नेपालमा आर्थिक विकास र समृद्धि एउटा साझा र बिकाउ नाराजस्तै बनिरहेको छ । चुनावअघि पनि प्रायः सबै राजनीतिक दलका चुनावी घोषणपत्रहरू पनि यस विषयकै सेरोफेरोमा केन्द्रित थिए । आर्थिक विकास र समृद्धिका लागि आवश्यक नीतिगत आधार तथा तदनुरूपको राजनीतिक इच्छा शक्ति र अन्य अवस्था छ/छैन, त्यसतर्फ भने खासै ध्यान दिइएको पाइँदैन । कतिपय यसलाई राजनीतिक स्टण्ट मान्ने गर्छन् भने कतिपय अब साँच्चीकै राजनीतिक कोर्ष सकिएकोले अबको बाटो आर्थिक विकास र समृद्धि नै हो भन्ने गरेका छन् । के हामी त्यो अवस्थामा छौं त ? यसै सेरोफेरोमा एकजना युवा अर्थशास्त्री, नेपाल इकोनोमिक फोरमका सिनियर फेलो चन्दन सापकोटासँग राजनीतिक परिवर्तनपछिको आर्थिक वृद्धि, विकास र समृद्धिका चुनौती तथा विकासको दिगोपनलगायतका विषयमा केन्द्रित रहेर आर्थिक अभियानका टीपी भुसालले गरेको कुराकानीको सार :

आर्थिक विकास र समृद्धिको नारासहित सरकार सङ्घीय बजेट निर्माणको चरणमा छ । राजनीतिक रूपले भनिए जस्तो वा चुनावी घोषणापत्रमा उल्लेख भए जसरी हामी आर्थिक समृद्धिको बाटोमा जान सक्ने अवस्था कस्तो देख्नुहुन्छ ?

हो, अहिले सबैले आर्थिक विकास र समृद्धिको कुरा त गरेका छन् । तर, मुख्य कुरा के हामी यसका लागि तयार छौं त भन्ने प्रश्न नै हो । विकासको आवश्यक पूर्वाधार छ । हामी आर्थिक रूपमा तथा अरू क्षमताका हिसाबले तयार छौ/छैनौं भनेर हेर्न जरुरी छ । चुनावी घोषणापत्रमा सबै राजनीतिक दलले हामी योे गर्छौं त्यो गर्छाैं त भने तर त्यही घोषणापत्रमा यी कामका लागि हामीले यहाँबाट स्रोत जुटाएर यसरी गर्छौं कसैले भनेनन् । मेगा हाइड्रोपावरको कुरा गरिएको छ । एक्सप्रेस हाइवेको कुरा गरिएको छ । मेट्रो तथा मोनो रेलको कुरा गरिएको छ । यी परियोजना देशका लागि रणनीतिक महत्त्व राख्ने खालका हुन्, यसका लागि वित्तीय व्यवस्थापन यसरी गरिन्छ भन्ने त कहीँकतैबाट आएन । हरेक परियोजनाका लागि रकमको जोहो कसरी गर्ने र ती परियोजना कति समयसम्म सक्ने सबै कार्ययोजना हुनु पर्दैन र ? यसका लागि कुनै ठोस कार्ययोजना देखिँदैन । त्यसैले मेरो विचारमा अहिले जुन कुरा भनिएको छ, त्यो पहिलेदेखि नै भनिँदै आएको कर्मकाण्डी आश्वासन मात्र हो ।

मुलुकमा राजनीतिक मुद्दा सकियो, जुन पार्टीले गरेपनि अबको काम भनेको आर्थिक विकास र समृद्धि नै हो भन्ने धारणा छ । अझै पनि राजनीतिक पार्टीहरूलाई अविश्वास गरिरहने त ?

यो भनेर पूर्ण निराशावादी बन्नु त भएन । तर, आशावादी पनि कत्ति बन्ने भन्ने हो । अलिकति सतर्क भने अवश्य बन्न जरुरी छ । पछिल्ला दुई दशकमा राजनीतिक अस्थिरताले हामीलाई गाँजेकै हो । यति ठूलो राजनीतिक परिवर्तन र स्थिरतापछि राजनीतिक महŒवाकाङ्क्षा त जन्मिन्छ नै । गर्ने चाहना भयो भने अब राम्रो अवसरचाहिँ छ । तर, त्यसका लागि नीतिगत स्पष्टता जरुरी छ । उद्योगी तथा व्यवसायीले पनि त्यो होस् भन्ने चाहेका छन् । यदि नीतिगत स्पष्टता भएन भने लगानीकर्ताले लगानी बढाउँदैनन् । अब केही दिनमा नै बजेट आउँदै छ । यसले कस्तो कार्यक्रम लिएर आउँछ, त्यो हेरेपछि पनि केही कुरा स्पष्ट हुँदै जान्छन् ।

पछिल्लो २ वर्षको आर्थिक वृद्धिदरलाई हेरेर पनि आर्थिक वृद्धि र समृद्धिको अपेक्षा बढी प्रचार गरिएको छ । यसमा दिगोपनको आधार के देख्नुहुन्छ ?

अहिले यही अवस्थालाई हेर्ने हो भने दिगोपनको आधार देखिँदैन । पछिल्लो २ वर्षमा हामीकहाँ भएको आर्थिक वृद्धि मूलतः भूकम्पपछिको पुनर्निर्माण र तीन तहका निर्वाचनको कारणले भएको हो । शून्यबाट ४ मा वृद्धि हासिल गर्न जति सजिलो हुन्छ, ४ बाट ६ मा वृद्धि हुन त्यति सजिलो हुँदैन । पुनर्निर्माणको किस्तामा गएको रकमले सरकारी पैसा खर्च भयो, अर्कोतर्फ निर्वाचनमा सरकारी तहबाट खर्च त हुने नै भयो, त्यसमाथि राजनीतिक दलले आफ्नो ढङ्गले गर्ने खर्च पनि ठूलो थियो । यसले धानेको हो नि । अब त भूकम्पपछिको पुनर्निर्माणमा लिने किस्ता पनि कम छ । अबको केही वर्ष निर्वाचन हुँदैन । अब आर्थिक वृद्धिको स्रोत के हुने त ? अब यो चुनौतीका बीच सरकारले निजीक्षेत्रलाई समेत साथमा लिएर केही विशेष क्षेत्रमा लगानी बढाउन जरुरी छ । जस्तो : आधुनिक कृषि (हाइभ्यालु कृषि), सडक र हवाई सञ्जाल, पर्यटन, ऊर्जा, हल्का खालको वस्तु उत्पादन तथा शहरी विकास र शिक्षाजस्ता क्षेत्रमा लगानी बढाउन जरुरी छ । यी खास क्षेत्रमा लगानी गर्न सके त्यसले दीर्घकालीन फाइदा दिन सकिन्छ ।

अर्थमन्त्रीले केही दिनअघि मात्रै विनियोजन विधेयकको सिद्धान्त र प्राथमिकताबारे प्रस्तुत गर्दै सरकारले आउने आर्थिक वर्षका लागि १५ खर्ब रुपैयाँको बजेट ल्याउने सङ्केत दिएका छन् । स्रोत व्यवस्थापन कति जटिल देख्नुहुन्छ ?

स्रोत व्यवस्थापन नै अहिलेको चुनौती हो । सरकारले राजस्व बढाउनु पर्‍यो, यो अर्को चुनौतीपूर्ण काम हो । यसका लागि दुईओटा बाटा छन्, एउटा राजस्वको दर वृद्धि गर्ने, अर्को दायरा वृद्धि गर्नु पर्‍यो । राजस्व चुहावट नियन्त्रण गर्न जरुरी छ । यो काम पनि आफैमा चुनौतीपूर्ण देखिन्छ । अहिलेका अर्थमन्त्रीले गर्न खोज्नु भएजस्तो देखिन्छ र तर त्यसको परिणाम अझैसम्म त्यति सन्तोषजनक त आइरहेको छैन । अहिले हेर्ने हो भने राजस्वको बढ्ने दर २० प्रतिशतभन्दा माथि देखिँदैन । तर, खर्च गर्ने दर बढी छ । अहिले त झन्सङ्घीय बजेट निर्माण गर्दा बजेट तलसम्म बढाउनु पर्ने हुन्छ । अर्को कुरा बजेटको ढाँचा नै अहिले फरक ढङ्गले निर्माण गर्नुपर्ने हो । किनभने प्रदेश सरकारले पनि आफ्नो बजेट बनाएको छ । यो बजेट गत आवको भन्दा कम हुनु पथ्र्यो । १५ खर्बको बजेट ठूलो हो । हामीले यो बजेट व्यवस्थापन गर्न सक्दैनौं । यसैले घाटा बजेट बढ्छ ।

ठूलो आकारको बजेटले अर्थतन्त्रमा कस्तो असर पार्ला त ?

बजेट घाटा बढ्नेबित्तिकै मुद्राको अवमूल्यन हुन जान्छ । किनभने हामीले बाहिरको वस्तु धेरै आयात गर्छौं । यसको असर मुद्रास्फीतिमा पर्छ । बजारमा तरलता कम हुँदा सरकारले ऋण उठाउने हो । सरकारले नै बजारको रकम उठाएपछि निजीक्षेत्र बैङ्क वित्तीय संस्थाहरूले कहाँबाट रकम लिने ? रकम अभाव भएपछि बैङ्कहरू बढी ब्याजदरमा रकम जुटाउनतिर लाग्छन् । यसले बैङ्क ब्याजदर पनि अस्थिर हुने भयो । यसले समग्र अर्थतन्त्रको चक्रमा नै असर पार्ने देखिन्छ । यद्यपि, उत्पादकत्व बढाउने क्षेत्रमा खर्च भए त केही वर्षमा त्यसले प्रतिफल दिन थाल्छ, तर त्यो सम्भावना पनि कमै देखिन्छ ।

अर्थमन्त्रीले संसद्मा पेश गरेका यी सिद्धान्त र प्राथमिकताले हालै जारी भएको श्वेतपत्रमा देखाइएका चुनौतीलाई कत्तिको सम्बोधन गर्न सक्छ ?

अर्थमन्त्रीले ल्याएको श्वेतपत्र राजनीतिक दस्तावेज मात्र हो । यसमा कुनै सन्देह नै छैन । यद्यपि, श्वेतपत्रमा एउटा कुरा देशको अर्थतन्त्रको अवस्था यस्तो छ है भनेर अर्थतन्त्रका आधारभूत कुराहरू उल्लेख गरिएको छ, जुन यसरी यो रूपमा यसअघिका अर्थमन्त्रीहरूले भनेका थिएनन् । तर, अर्थमन्त्रीले श्वेतपत्रमा राजनीतिक रङ थपिदिनु भयो । उहाँले निजीकरणविरुद्ध आफूलाई प्रस्तुत गर्नुभयो । जब कि एमाले र माओवादी पटकपटक सरकारमा रहँदा पनि आफूलाई निजीकरणविरुद्ध प्रस्तुत गरेनन् । बरू काङ्ग्रेस पार्टीकै उद्योगमन्त्री नवीन्द्रराज जोशीले सरकारी उद्योग सञ्चालनको प्रयास गरे । औषधि उत्पादन पनि भयो । त्यसकारण अर्थमन्त्रीले ल्याएको श्वेतपत्रमा राजनीतिक रङसहितको द्वैध चरित्र देखियो । अनि केही दिनअघि संसद्मा पेश गरेका यी सिद्धान्त र प्राथमिकता त काम गर्ने दस्तावेज हो । श्वेतपत्र र संसद्मा पेश गरेका सिद्धान्त र प्राथमिकताबीच मेल खाँदैन । तुलनात्मक रूपमा हेर्ने हो भने श्वेतपत्र राजनीतिक रूपमा बढी प्रेरित छ भने यो वस्तुगत छ, अलि सन्तुलित पनि छ । केलाएर हेर्ने हो भने हिजो काङ्ग्रेसले गरेको र उहाँले प्रस्तुत गरेको कुरामा सिद्धान्ततः खासै फरक पनि छैन ।

अहिले तीन तहका संरचनामा खर्च गर्नुपर्ने अवस्था छ । पछिल्लो राजनीतिक परिवर्तनले आम नागरिकमा महŒवाकाङ्क्षा पनि बढाएको छ । यो महत्त्वाकाङ्क्षालाई यथार्थमा परिणत गर्न सरकारसँग कस्ता चुनौतीहरू छन् ?

यी सबै समस्या काम नगर्दा आएका हुन् । काम नभएपछि चुनौती त बढ्छ नै । हामीलाई २/४ वर्षअघि नै थाहा थियो नि, अब मुलुक सङ्घीयता मोडलमा जाँदै छ भन्ने कुरा । न नेताले काम गरे न त कर्मचारीतन्त्रले नै गर्‍यो । सङ्घीयतासम्बन्धी कानून, आवश्यक पूर्वाधार पहिले नै बनाउनु पर्दैन ? प्रदेशको राजधानी ४ वर्षअघि नै तोक्न सकेको भए यो बीचमा त्यहाँ पूर्वाधार बनिसक्थ्यो । अहिले गएर काम गर्न सजिलो हुन्थ्यो । अहिले स्थानीय तहको निर्वाचन सम्पन्न भएको १ वर्ष बितिसक्यो । स्थानीय तहका जनप्रतिनिधि ‘काम गर्न पाएनौंm काम गर्न देऊ’ भनेर छटपटाइरहेका छन् । तर, अहिलेसम्म उनीहरूले के गर्ने भन्ने कानून नै बनेको छैन । यो गल्ती कसको ? राजनीतिक नेतृत्व र कर्मचारीतन्त्रको खेलाँचीका कारण यी समस्या आएका हुन् । जब राजनीतिक नेतृत्वमा दूरदर्शिताको अभाव हुन्छ, यो समस्या आउँछ । अहिले भएको पनि त्यही हो । अर्को कुरा सङ्घीयता कार्यान्वयन भनेको बजेटको कार्यान्वयनलाई भनेर बुझेको अवस्था छ ।

त्यो भन्दा अघि त योजना चाहियो नि । योजना निर्माण गर्ने निकाय केही दिन अघिसम्म नेतृत्वविहीन थियो । अहिले परिपूर्ति भएकाहरूको पृष्ठभूमि पनि त्यति सन्तोषजनक देखिँदैन । प्रादेशिक योजना अयोगको कुरा त कता छ कता । पहिले योजना बनाएर त्यो अनुरूपको बजेटको सिलिङ बनाएर काम गर्नुपर्ने हो, तर खोई त ? जनतालाई राजनीतिक रूपमा भाषणमा गाउँगाउँमा सिंहरदबार पु¥याउँछौं भन्यौं, तर काम गरेनौं । उनीहरूको महत्त्वाकाङ्क्षा बढ्नु स्वाभाविक नै हो । यो अवस्था हेर्दा अबको १/२ वर्ष डामाडोल नै रहन्छ ।

नेपालको बाह्य मात्र होइन, आन्तरिक अर्थतन्त्र पनि रेमिट्यान्स (विप्रेषण)ले धान्दै आएको छ ? पछिल्लो समयमा यसको आप्रवाहको वृद्धिदर पनि घटेको देखिन्छ । यसले कस्तो अप्ठ्यारो पार्ला ?

हाम्रो अर्थतन्त्र नै विप्रेषणमा निर्भर छ । हामीकहाँ आउने विप्रेषणमध्ये ८० प्रतिशत त उपभोगमै सकिन्छ । अहिले विप्रेषण घटिरहेको अवस्थामा घरायसी खर्चको माग पनि घटाउँछ । यसको प्रत्यक्ष असर कुल गार्हस्थ्य उत्पादनमा पार्छ । किनकि व्यक्तिगत उपभोग घट्ने भयो । अर्को सरकारको समग्र अर्थतन्त्रमा असर गर्छ । अहिले राजस्वमा जुन खालको तनाव देखिन्छ, यसकै असर हो । यसै गरी विप्रेषण कम आउँदा बैङ्कहरूमा तरलताको समस्या पनि बढ्ने भयो । चालू खातामा घाटा हुने भयो । वैदेशिक मुद्रा सञ्चिति पनि कम हुने भयो । यसले त अर्थतन्त्रको सबै ठाउँमा असर गर्छ । अर्को भनेको संस्थागत विषयमा असर गर्छ । पहिले कर्मचारीतन्त्रले भइहाल्छ, आइरहेकै छ भन्ने ठाने, अहिले तनाव भएको छ यिनीहरूलाई कसरी व्यवस्थापन गर्ने भनेर । रेमिट्यान्सको वृद्धिदर अझैै पनि घट्दै जान्छ । यसले हामीलाई जताततै असर मात्र गर्ने हो । त्यसकारण निजी क्षेत्रको पुनःसंरचना चाँडो गर्न जरुरी छ ।

समृद्धिका लागि सुशासन एउटा मीठो नारा नै भएको छ । यही राजनीतिक नेतृत्व र यही कर्मचारीतन्त्र अन्तर्गत यो कत्तिको सम्भव छ ?

हिजोकै राजनीतिक नेतृत्व र हिजोकै कर्मचारीतन्त्र हो, जसले हिजो सानो आकारको बजेटमा त्यसको ७० प्रतिशतसम्म पनि खर्च गर्ने क्षमता राख्दैनथ्यो । आज सय प्रतिशत माथि बजेट पु¥याँउदा उसले खर्च गर्छ भनेर कसरी पत्याउने ? यो सबै कामका लागि क्षमता अभिवृद्धिदेखि उसको कार्य पद्धति हेर्न जरुरी छ । सुशासन अर्थतन्त्रको ब्ल्याक बक्स हो । यसको शुरुआत कहाँबाट गर्ने भन्ने कुरा महŒवपूर्ण प्रश्न हो । शाखा अधिकृतबाट गर्ने कि सचिव स्तरबाट । सुशासन संस्कृति हो, प्रहरी सेना लगाएर योल्याउन सकिँदैन । यो राजनीतिक तहबाटै आउन जरुरी छ । यसको लागि राजनीतिक अडान आवश्यक छ ।

स्वदेशी उद्योगको प्रवर्द्धन तथा आयात प्रतिस्थापनका नयाँ योजना अगाडि सारिएका छन् । यसो गर्न कत्ति सहज छ ?

निर्यात प्रवर्द्धन गर्न पहिले त हामीसँग निर्यात गर्ने सामान हुनुपर्‍यो । छिमेकी मुलुकले यो गर्‍यो त्यो गर्‍यो भनेर बसेर मात्र पनि भएन । आफ्नो क्षमता पनि बढाउनु पर्‍यो । अर्को कुरा हामीले भारत पठाउने वस्तु कस्तो छ ? कुन गुणस्तरको छ ? कृषिजन्य वस्तु त्यो पनि अप्रशोधित । अनि अलि कति टेक्सटायल । यसको निर्यात प्रवर्द्धनको कुराभन्दा पहिले उत्पादन बढाउनु पर्‍यो । उत्पादन बढाउन पूर्वाधार निर्माणमा जोड दिनु पर्‍यो । पूँजीमा उद्योगीहरूको पहुँच पुग्न जरुरी छ भने अर्को व्यापार सहजीकरण । यी कुराहरू नगरी निर्यात प्रर्वद्धन गर्छु भन्नु त्यति सहज छैन ।

नेपालको आर्थिक वृद्धिदर मुख्यतया कृषिक्षेत्रको वृद्धिदरमा निर्भर छ । यस परिप्रेक्ष्यमा सरकारले लगानी बढाउनुपर्ने माग चर्को रूपमा आउँछ । तर, कृषिको वृद्धिदर भने बजेट विनियोजनमा निर्भर देखिँदैन, के गर्नुपर्ला ?

कृषिमा खुद्रा बजेट छर्ने गरिन्छ । कृषिलाई आधुनिकीकरण गर्ने हो भने ठूल्ठूला आयोजनामा लगानी गरौं । ठूल्ठूला बहु आयामिक परियोजनामा खर्च गरौं, जसले अर्थतन्त्रलाई दीर्घकालमा केही सहयोग गर्न सकोस् । त्यस्ता परियोजनाले रोजगारीसमेत सृजना गर्छ ।

एउटा अर्थशास्त्रीको नाताले आर्थिक पुनःसंरचनाका लागि गर्नुपर्ने अल्पकालीन, मध्यकालीन तथा दीर्घकालीन योजनाहरू कस्तो हुनुपर्ने देख्नुहुन्छ ?

पहिलो कुरा हामीले वैदेशिक लगानीमा सम्झौता गरेका वा आफ्नै पूँजीले बनाइएका जति आयोजना छन्, ती आयोजना सम्पन्न गर्नपहिलो प्राथमिकता दिऔं । यो गर्नासाथ आर्थिक वृद्धि त्यसै हुन्छ । जस्तो कि अहिले नै एशियाली विकास बैङ्कको ऋण र सहयोग गरी करीब १ अर्ब डलर छ । विश्व बैङ्क, भारतीय दूतावास र चीनको पनि १ अर्ब डलरको हाराहारीमा बजेट छ । यो सबै जोड्दा ५ अर्ब डलर जति हुन्छ । हाम्रो देशको अर्थतन्त्र ३० अर्बको छ । त्यसमा ५ अर्ब बराबरको काम सम्पन्न गर्नुस् त, अर्थतन्त्र कहाँबाट कहाँ पुग्छ । नेपालले काँचुली फेर्छ । त्यसपछि देशको आवश्यकताको मध्यकालीन रणनीति बनाऔं । जब हामी मध्य आय भएको मुलुकमा पुग्छौं, त्यसलाई दिगो कसरी बनाउने भन्नेतर्फ सोचौं । अहिले हामीले सन् २०३० सम्ममा मध्य आय भएको मुलुक बन्छौं भनेका छौं । त्यो मध्यकालीन कुरा भयो । अब २०३० पछिको नेपाल सोचौं ।

Friday, May 18, 2018

Merger of two communist parties in Nepal and more

From The Kathmandu Post: Two major national left political forces--CPN-UML and CPN (Maoist Centre)--merged to become the Nepal Communist Party on Thursday, 69 years after the communist movement gained momentum in the country with the establishment of a party by the same name. 

The NCP announced a nine-member Central Secretariat. Apart from Co-chairs Oli and Dahal, the team has former PMs Madhav Nepal and Jhala Nath Khanal as senior leaders. Bishnu Poudel, one of the architects of the unification process, has been named general secretary while Narayan Kaji Shrestha has got the responsibility of spokesperson. The secretariat has senior leader Bam Dev Gautam, Defence Minister Ishwor Pokhrel and Home Minister Ram Bahadur Thapa as members. The NCP will have a 45-member Standing Committee and 441 Central Committee members. The Standing Committee comprises 26 UML and 19 Maoist Centre leaders while the Central Committee has 241 UML and 200 Maoist leaders.

According to the declaration, the parties have agreed to highlight the positive aspects of the Janata ko Bahudaliya Janabad (People’s Multi-party Democracy), currently practised by the UML, and the Janabad of the 21st century, the guiding principle of the Maoist party, to create a new ideological framework governed by people’s democracy and socialism.

Govt to scrap fees unfairly levied on Malaysia-bound Nepali workers

From The Kathmandu Post: Minister for Labour, Employment and Social Security Gokarna Bista on Thursday decided to scrap all the fees imposed on Nepali migrant workers as a result of the Malaysian government’s unilateral move to add extra financial burden on them. Nepali workers are compelled to pay for MiGRAMS, bio-metric medical test, services of the One Stop Centre (OSC) operated by Malaysia VLN Nepal Pvt Ltd, Immigration Security Clearance (ISC), and visa fees, totalling up to Rs18,480 per individual excepting other expenses borne by Nepali workers before landing jobs in Malaysia.

Nepali workers have been paying Rs 3,300 for online registration (MiGRAMS) while other bio-metric identification tests cost them Rs4,500. Other charges include Rs3,164, which is paid at the OSC for collecting workers’ passport and Rs3,616 to the VLN for online data entry. Besides, one has to pay Rs3,200 for ISC being provided by the GSG Services Nepal and Rs700 in visa fee to the Malaysian embassy.

Current account deficit widens to Rs 171.64 billion; BOP swings into Rs 14.6-billion deficit

From MyRepublica: Both current account and balance of payment (BoP) of the country slipped into deficit in the third quarter of the current fiscal year 2017/18, posing risk to external sector stability. According to the ‘Current Macroeconomic and Financial Situation of Nepal (based on Nine Months’ Data of FY2017/18’ released by the Nepal Rastra Bank (NRB)) on Thursday, current account deficit widened to Rs 171.64 billion in the review period from a deficit of Rs 10.34 billion in the same period of FY2016/17. Similarly, the overall BoP turned into a deficit of Rs 14.60 billion in contrast to a surplus of Rs 50.60 billion in the same period of the previous fiscal year.

According to the NRB data, merchandise imports in the review period rose 20.6 percent to Rs 876.29 billion compared to a growth of 39.7 percent in the same period of the previous year. Exports, on the other hand, increased by 8.2 percent to Rs 59.74 billion compared to a surge of 12.1 percent in the same period of FY2016/17. The declining growth rate of remittances is also pushing the current account deeper into deficit. Gross foreign exchange reserves decreased by 1.4 percent to Rs 1064.37 billion as at mid-April 2018 from Rs 1079.43 billion as at mid-July 2017. The workers’ remittances, a major source of foreign currency earning for Nepal, increased 5.6 percent to Rs 540.38 billion in the review period compared to a rise of 6.3 percent in the same period of the previous year.