Nepal’s economy was in the midst of a protracted slowdown until last month, but on Thursday, it received a body blow.

The government on Thursday temporarily stopped issuing on-arrival tourist visas to all countries, put an end to all spring mountaineering expeditions, including Everest ascents and halted the issuance of labour permits—all to prevent the spread of Covid-19.

The cancellation of visas and mountaineering expeditions is expected to put around 20,000 tour, trekking and mountain guides out of job.

Statistics from the Tourism Ministry show there are 16,248 trekking and mountaineering guides and 4,126 tour guides in the country. According to a ministry survey conducted in 2014, around 138,148 persons were engaged in the tourism sector. The survey shows that one employment is generated from every six tourists.

Nepal’s tourism sector generated Rs240.7 billion in revenue and supported more than 1.05 million jobs directly and indirectly in 2018, according to the annual World Travel and Tourism Council research report. The travel and tourism's total contribution to the country’s gross domestic product stood at 7.9 percent the previous year.

“We have estimated that around 1 million people in the mountain belt who make their living through the spendings of foreign trekkers and mountaineers will suffer,” said Nabin Trital, senior vice president of the Trekking Agencies Association of Nepal. “There are no precise figures on the spending of trekkers and mountaineers, but it amounts to millions of dollars.”

The ongoing Covid-19 outbreak had already led to cancellations in hotel and travel bookings since February but Thursday’s decision has now sounded the death knell for Nepal’s spring tourism season, the most lucrative time of the year for the travel and tourism industry.

“There has been a flurry of booking cancellations since mid-February, but Thursday’s decision has shaken the economy,” said Bhai Krishna Khadka, senior vice-president of the Tourist Guides Association of Nepal. “But we expect that this will be a temporary restriction. We are hopeful that the tourists will return.”

The hardest-hit sector will be Everest, where an entire economy, consisting of climbing guides, porters, hotels and lodges, subsists on spring mountaineering. By the end of the expedition, hardworking climbing guides will have made around $8,000.

The federal government too makes millions every year in climbing permits. Foreigners pay $11,000 to obtain a permit and spend anywhere between $40,000 and $90,000 to climb Mount Everest. The Department of Tourism collects around $4 million annually in royalties from Everest climbing permits.

“There were confirmed bookings of at least 350 people to summit Everest this spring. But that’s gone now,” said Santa Bir Lama, president of the Nepal Mountaineering Association. A group of five climbers hires at least 30 sherpas and a mountaineering guide could earn $100 per day, excluding tips.

“With Thursday’s decision, around 10,000 people—ranging from porters, high altitude guides, kitchen staff and other workers—are all going to go jobless,” said Lama. “We don’t have the figures for the actual losses, but we can estimate that billions of rupees have been wiped out.”

Related industries, like the aviation sector, which is closely linked to the trekking and mountaineering industry, are also badly affected and are likely to be worse off if certain measures are not taken. Aviation was already reeling from a lack of passengers, but on Friday, immediately after the government's decision, Nepal Airlines decided to cut its flights in half.

The corporation said it was forced to cut one of its two daily flights to Delhi and suspended its Mumbai flights for a month, effective from Sunday. It also cut flights to Bangkok and Hong Kong and cancelled all flights to Doha for an indefinite period.

The Airlines Operators Association of Nepal said that virus fears and the government’s travel advisory had brought airlines to their knees.

“The domestic airlines passenger occupancy has nose-dived by 60 percent while helicopter bookings for the spring season have been cancelled 70 percent,” the association said in a statement.

But there could be a way out for airlines as the Nepal Oil Corporation is slated to review domestic fuel prices next Monday, and airlines are hoping that the state-owned monopoly will slash prices of jet fuel following a recent collapse in global crude prices.

A decrease in jet fuel prices could offer some relief to carriers, which are currently under pressure due to flight cancellations, suspensions and declining airfare. With fuel prices contributing around 30 percent to an airline's operating costs, lower prices would surely provide a respite, said Yog Raj Kandel, spokesperson for the Airlines Operators Association of Nepal.

According to economists, the government’s actions are aimed at containing the spread of the virus, which is paramount in order to save lives, but it also needs to put in place plans to minimise shocks and for eventual recovery.

“It is a combination of supply-side and demand-side shocks, so a coordinated policy response is needed to limit damage and for eventual recovery,” said economist Chandan Sapkota.

According to Sapkota, over time, both fiscal and monetary tools can be used to lower the burden on businesses.

“On the fiscal front, the government can think of tax holidays or incentives to cover a part of the cost on businesses, especially micro, small and medium enterprises. For workers facing a dent in income, the government can introduce temporary social security schemes, including using the social security fund and rerouting the Prime Minister’s Employment Fund to transfer funds to low-income daily wage earners,” said Sapkota.

On the monetary front, the central bank can extend the time and amount allocated for refinancing, loosen norms for troubled assets so that nonperforming assets don't increase drastically, provide interest exemptions for a short-time, and roll out low interest lending facilities for micro, small and medium enterprises, said Sapkota.

According to Gunakar Bhatta, spokesperson for Nepal Rastra Bank, the central bank has already announced that it will consider refinancing, restructuring and rescheduling of loans extended to affected sectors while releasing its review of the monetary policy. But the government has yet to announce any measures to support affected areas, although it has been saying that it is currently studying the impact of erosion.

Bhatta said that the central bank was conducting an impact analysis.

“Currently, we are discussing providing support to the tourism and aviation sectors which have been hit by the coronavirus the hardest,” he said. “If more sectors demand relief, we have to prioritise, based on whether they are productive sectors, as we may not have the capacity to provide relief to all the sectors.”