Money
State can help people and businesses hit by Covid-19 as long as it manages to contain the infection, economic experts say
Tourism industry is the only sector that needs the government’s support so far.Prithvi Man Shrestha
At a time when the government is struggling to meet its revenue target, its liability is only likely to grow if it is required to bail out the industries hit hard by the impact of Covid-19 pandemic.
According to the Finance Ministry, it could raise revenue around just Rs570 billion as of mid-March against the target of Rs683 billion, a substantial gap between target and achievement.
Economic experts say while the government will find it harder to raise more revenue in the coming months due to slowed economic activities, should the necessity arises to rescue businesses as a result of Covid-19’s economic fallout, it will further strain the government’s financial position.
The Federation of Nepalese Chambers of Commerce and Industry has already requested the government to come up with a rescue package for the tourism industry, which has borne the most brunt from the pandemic. The federation has also sought rescheduling of loan repayment and tax.
As long as the country can avoid new infections, experts say the government can support the sectors affected by the global crisis.
So far, Nepal has recorded two cases of Covid-19. While one of the patients has already recovered the second is undergoing treatment at the Sukraraj Tropical and Infectious Disease Hospital in Teku, Kathmandu.
Globally, the highly contagious virus as of Monday afternoon had infected more than 349,000 people and caused more than 15,000 deaths.
“Obviously, the cost for the government will grow but it is time to help the people and the businesses affected by the Covid-19 pandemic,” said Poshraj Pandey, an economist. “This is not the time to evaluate how much revenue was raised. The government has the fund that it has not been able to spend. That fund can be utilised to help the people and businesses hit by the pandemic.”
Pandey also suggested that the Prime Minister Employment Programme should support the daily wage earners who are losing their jobs due to slowed economic activities.
“For struggling businesses, the government can provide interest subsidy on the bank loans,” said Pandey.
Former Finance Secretary Rameshore Khanal does not see the need to roll out bailout package at the moment.
“Except for tourism, other businesses have not been hit hard. The government could support the tourism sector—hotels, restaurants, airlines and travel and trekking agencies, among others by providing interest subsidy in bank loans and rescheduling tax payment deadline without charging additional fees and interest,” Khanal said.
As for daily wage earners, particularly those in Kathmandu Valley, Khanal suggested that the government could support them with cash handouts for food and lodging.
If the pandemic takes over Nepal like many other countries like China, the US and the EU states, experts have warned that the cost of supporting the country’s economy would be much higher.
“The government will have to spend a huge amount in the health sector constraining government ability to spend in other sectors,” Shankar Sharma, former vice-chairman of National Planning Commission, had told the Post last week.
The government said that it has been studying the impact of the Covid-19 pandemic by forming a task force led by a joint secretary.
“The task force is studying economic indicator in each sector on a daily basis,” said a joint secretary at the Finance Ministry.
Nepal Rastra Bank has also announced through the mid-term review of the monetary policy that it could provide refinance facility, restructuring and rescheduling of loans provided by banks to the businesses affected by the crisis.