Economic growth at a rate of just over 6 percent for the last three years. An 8.5 percent growth target for the current fiscal year. A strong and stable government after years of political instability. Everything was lined up just right when KP Sharma Oli took over the reins of government. And then came Covid-19 and shattered the global economy.

The pandemic, which has already sent the world economy into a recession, has drastically altered Nepal’s growth outlook and it looks like there are tough times ahead for the country.

Nepal has been under lockdown since March 24, effectively shutting down the entire country. But even before the lockdown, the country’s economy was already reeling from the effects of the Covid-19 pandemic. Tourism slowed and eventually stopped, restaurants and hotels had no customers and all spring expeditions, including those on Everest, were cancelled.

The financial markets and the currency, which hit a new low of Rs 122.36 per US dollar on Sunday, have also taken a beating.

“The country’s economy is estimated to have lost more than Rs100 billion in Chaitra (mid-March to mid-April) alone,” said Pushpa Raj Kadel, vice-chair of the National Planning Commission. “I expect that the loss of Chaitra month alone will contribute to bringing the economic growth down by two percentage points.”

On Sunday, the World Bank raised alarm bells, calling on South Asian nations to ramp up action to curb the health emergency, protect their people, especially the poorest and most vulnerable, and set the stage now for a quick economic recovery.

In its latest South Asia Economic Focus, the global lender said that it anticipates a sharp economic slump in each of the region’s eight countries, caused by a halt to economic activity, collapsing trade, and greater stress on the financial and banking sectors.

The World Bank has predicted that Nepal’s growth rate will be in the range of 1.5 - 2.8 percent in the current 2019-20 fiscal year, followed by 1.4 - 2.9 percent in 2020-21 and 2.7 - 3.6 in 2021-22.

These projections contrast sharply with the government's target of a high growth trajectory throughout the coming years. As per the 15th periodic plan 2019/20 - 2023/24, the government had aimed for an average growth rate of 9.6 percent during the period.

While presenting the government’s policies and programmes in May last year, President Bidya Devi Bhandari had said that the current fiscal year would see the highest ever economic growth in Nepal’s history and that Nepal’s would achieve double digit growth in the next four years.

Earlier this month, the Asian Development Bank slashed its own growth forecast for Nepal to 5.3 percent for this fiscal year, which ends mid-July, a sharp decrease from last year's 7.1 percent growth.

“Nepal's economic growth is likely to see a sharp slowdown this fiscal year as the global Covid-19 pandemic cripples business and consumer spending,” the multilateral funding agency said in its annual Asian Development Outlook 2020 report.

Before the Covid-19 pandemic, the bank had forecast a 6.3 percent growth rate while the government had aimed for an ambitious target of 8.5 percent.

Economists, however, had described the ADB projection as “much too optimistic".

But Covid-19 has now engulfed the whole world, killing more than 100,000, infecting over 1.7 million and putting the world economy in shambles.

Nepal so far has reported only 12 Covid-19 cases, but given the persistent threat of the virus, an extension to the lockdown is likely. Neighbouring India, which has seen a steady rise of infections and deaths, has already decided to extend the lockdown until April 30.

With economic activities ground to a halt, the government will struggle to generate revenue, the largest source for state coffers, according to economists.

According to Yagya Dhungel, joint secretary at the Finance Ministry, the government could have missed the revenue collection target by nearly Rs200 billion as of Friday.

“Against the target of Rs 798 billion, only Rs600 billion has been collected,” he said.

As a result of the crisis, the government has been forced to divert even the capital budget towards containing the coronavirus. This is certain to affect economic output from government spending.

“Now, the government will not be able to spend the development budget when development activities pick up once again and the private sector spends accordingly,” said Kadel.

With almost all labour destinations under lockdown, yet another source of the country’s income—remittance—is also running dry. Nepal has long been dependent on remittance to run the domestic economy. In the last year, the total size of remittance was equivalent to over 26 percent of Nepal’s GDP.

The International Labour Organization has already estimated the loss of around 25 million jobs around the world due to the Covid-19 crisis.

“We will soon start to see the effect here,” said Hari Roka, a commentator on politics and the economy. “Foreign employment was never a sustainable solution to drive Nepal’s economy and the current government, like many governments in the past, failed to work to create jobs at home.”

Globally, economists are describing the current situation as highly fluid, with no one in the position to offer a solution.

“What we know is that the economic impact of this crisis will be huge,” said Kadel. “We will be able to determine the scale of impact depending on thes spread, intensity, and duration.”

With domestic resources shrinking, Finance Minister Yubaraj Khatiwada on Friday sought foreign assistance for Nepal through new windows during a video conference with senior officials from multilateral lending agencies such as the World Bank, Asian Development Bank, Asian Infrastructure Investment Bank and International Monetary Fund. He also asked for a deferral of the loan repayment schedule and debt relief from bilateral donors.

Experts have already cautioned about a reduction in foreign aid, as the pandemic has already started into the coffers of the developed countries.

“There might be aid cuts to developing and underdeveloped countries due to the Covid-19 pandemic,” Jagadish Chandra Pokharel, former vice-chairman of the National Planning Commission, told the Post in an earlier interview with the Post. “To what extent the assistance will go down will depend on how much economic impact the pandemic has on their economies, and how much moral responsibility they feel to help poor nations.”

Experts and economists say the economic challenges faced by the country in the wake of the Covid-19 pandemic should persuade the Oli administration to make amends and set its priorities right.

“Even in the time of crisis, the Oli administration has been embroiled in corruption. Covid-19 should be an opportunity for the government to realise its mistakes,” said Pokharel. “It can still improve its image by effectively responding to the pandemic and changing its style of governance.”

At least two Cabinet ministers–Deputy Prime Minister and Defence Minister Ishwar Pokhrel and Health Minister Bhanubhakta Dhala–are currently under the scanner for corruption in the procurement of medical equipment to fight Covid-19.

But this is not the first corruption scandal the Oli administration has been embroiled in.

There have been scandals involving Yeti Holdings, the Baluwatar land grab and the corruption case against Gokul Baskota, one of Oli’s favoured ministers.

Analysts say that the gravity of the pandemic still has not set in and the administration continues to behave now as it did earlier.

Despite having an opportunity to take the country on the path of prosperity, which was the Nepal Communist Party’s election promise, it has sunk time and again into a morass of corruption, they say.

“The party’s election manifesto talked about a welfare state, but the communist government barely did anything in that direction despite having the mandate and resources,” Roka told the Post. “Then came this crisis, and it will have a profound impact on the party’s future.”