The government cannot spend, while common folks don’t have much to spend. Persistently high inflation is eating into people’s earnings and destroying their savings. There is a slump in the sales of everything from apparels to apples. As more and more able-bodied men and women leave the country, Nepal is being emptied of its most productive workforce. In their absence, establishments of higher education are reeling. Industries, or what remains of them, face a crippling shortage of qualified manpower. It’s a gloomy picture all around. An increase in remittance and tourist inflow cannot even begin to compensate for the losses other sectors of the economy are racking up. And now, the country has formally entered recession—defined as two consecutive quarters of negative growth—for the first time in six decades.

One big reason for the country’s economic mess is continued political instability. The constantly changing cast of characters in Singha Durbar does not inspire much confidence among the private sector that contributes 81 percent to the national economy (and accounts for 85 percent of jobs). Those charged with steadying the economy are fighting among themselves rather than working together to pull the country out of the current mess. Of late, Nepal is increasingly compared to Sri Lanka, which experienced unprecedented political and social unrest at the start of 2022 after the national economy went bankrupt. While our policymakers like to tamp down any talk of a “Sri Lanka-like” situation in Nepal, the economic problems the two countries face have uncanny similarities.

The crisis in Sri Lanka was triggered by rapid depletion of foreign exchange reserves. At the rate imports are burgeoning and exports depleting, it might not be long before Nepal’s foreign reserves also run out. And just like Sri Lanka, many Nepalis are now struggling to buy even daily supplies with their meagre earnings. The Rajapakshas had to be booted out of power in the island nation after they started running the country as a fief. They spent lavishly on vanity projects while ignoring the fundamentals of the economy. Our political class is not so different. Despite widespread reporting of the misuse of the Constituency Development Fund, lawmakers are clamouring for the continuity of this provision that will give each of them Rs40 million of largely unaudited money to be spent in their electoral constituencies. It’s an open secret that most of it ends up in the pockets of the members of their patronage networks. The state’s obligations towards the elderly and the retired are also on the up, mostly due to the populist measures successive governments have taken to please these constituencies.

Even while all the country’s economic indicators are in deep red, the government was until recently making rosy promises of above seven percent growth, which, as the economists kept reminding everyone, was impossible. Given the scale of the crisis, there is also very little cooperation among the political parties. There is no political consensus on how to reinvigorate the moribund economy, how to create jobs and how to unlock public spending. They forget that we are all in the same boat. The start of a recession should be a warning bell. If our policymakers don’t get their act together soon, the chaotic scenes that unfolded on the Lankan streets last year could soon be seen right here in Nepal. If this sounds alarmist, well, these are drastic times. The sooner the need for drastic measures is realised, the better.