Nepal plans to start its road to economic recovery as third-wave loomsEven though the Cabinet chaired by Prime Minister Deuba on July 13 had decided to introduce a special package to revive the economy within a month, it's yet to announce any package.
Prime Minister Sher Bahadur Deuba on Sunday said that the government was working on short, medium and long-term strategies to rehabilitate the economy battered by the Covid-19 pandemic.
But the looming third wave may impede the economic recovery as the country’s efforts may be complicated by the more contagious variant. A third wave of the Covid-19 pandemic is imminent and unavoidable, public health experts, epidemiologists, virologists as well as the Ministry of Health and Population, all agree.
And Prime Minister Deuba has also warned the public of the looming third wave.
Even though the country’s economy was on the road to recovery after the first Covid-19 wave, the second wave that hit the country in April came as a major setback, as the government was forced to impose yet another prolonged lockdown slowing down economic activities.
The pandemic has so far claimed over 10,000 lives, which is slightly higher than the number of people killed in the 2015 earthquakes.
As of Friday, the country’s 57 districts out of 77 are under lockdowns, albeit they are not stricter, according to the Ministry of Home Affairs.
As a result, the government itself admitted that meeting the expected growth of four percent in the last fiscal year 2020-21 that ended in mid-July would be challenging.
Even though the cabinet chaired by Prime Minister Deuba on July 13 had decided to introduce a special package to revive the economy within a month, it is yet to announce any package even after the deadline expired.
Speaking virtually at the Kantipur Economic Summit organized by Kantipur Media Group on Sunday, Prime Minister Deuba discussed the priorities of the government under the short-, medium-, and long-term strategies to revive the economy without making any specific announcements.
According to him, vaccination against Covid-19 is the main weapon to fight against this pandemic.
As of Sunday, a total of over 8 million people have got at least one jab. As many as 4.68 million people have received their first jab while 3.36 million people have been fully vaccinated, according to the Ministry of Health and Population.
The country has so far got delivery of 10.8 million vaccine doses from different countries. “Additional 10 million vaccine doses will arrive in the country by mid-October,” said Deuba.
He said that the government would concentrate on introducing appropriate relief packages while ensuring economic stability after the vaccination is over.
“Protecting small enterprises, addressing the issues of micro, small and medium enterprises, creating demands for production of large scale industries, ensuring access to people working in the informal sector and protecting the agriculture-based industries are other immediate priorities of the government, according to Prime Minister Deuba.
“Likewise, tourism and transportation services, party palaces and department stores will also get relief and people in these sectors will also be prioritized for vaccination,” he said.
In the medium term, economic revival will get priority after the pandemic situation improves.
Under this strategy, accelerating the implementation of road projects that would contribute to the employment of the poor, initiating daring legal reforms to attract investment in the employment-centric industrial sector, improving standards of hospitals, enhancing the capacity of local governments to tackle disasters and developing a national alert system (on disaster) are other priorities of the new government.
The long-term strategy will be based on the conclusion of the study on a broader impact of the pandemic on the economy of specific geographical areas. Based on the study, priority will be given to completing economically transformative projects and improving the quality of education and social security.
Even though the previous government led by KP Sharma Oli came up with a number of relief measures for Covid-19 affected people and enterprises through the budget for the current fiscal year, the new government also decided to introduce a package.
The budget has made provisions for conducting training on handicraft making, plumbing, electronics, cooking, beauty care, masonry, and carpeting, among others, for the people who lost their jobs at home and abroad. It also talks about implementing the Prime Minister Employment Programme with necessary revisions to provide at least 100 days of employment.
However, there is no specific provision of relief for the wage-workers even though some of the provisions such as providing free electricity up to 20 units for the period of lockdown and free water up to 20,000 litres per month could provide them some succour.
The monetary policy unveiled by the Nepal Rastra Bank on Friday for the current fiscal year has sought to help enterprises and individuals hit hard by the Covid-19 pandemic by extending the deadline of paying loans and offering subsidized loans and refinance facilities.
Finance Minister Janardan Sharma said that the government needed to support small and large enterprises affected by Covid-19 with policies and financial resources. “The government also needs to support the poor people whose number has grown from an estimated 18 percent,” he said.
Even though Finance Minister Janardan Sharma hinted last week while presenting the White Paper titled ‘Information on Current Economic Situation of Nepal’ on the state of the economy at the House of Representatives that the new government would introduce a replacement bill to change the current budget in line with new government’s priorities, it appears far from sure.
On Sunday, he hinted at bringing a replacement bill either with the existing provision or with an amendment.
“We are still discussing whether to continue the existing provision of amending it,” said Sharma. Considering the possibility that the bill may not be passed in the House, speculations are rife that the government is preparing to end the House session and run the state with the ordinance.
But, Sharma said that the government has not yet considered reintroducing the ordinance for the budget. “Introducing an ordinance on a budget is the option only in complicated situations,” he said.
But, the government has promised an economic revival plan which suffered one after another setback in the wake of the first and the second waves of Covid-19. Whether he will introduce such a plan through an amendment to the budget or through any other means, is not clear.
As a result of the nearly four-month-long lockdown to control the spread of the pandemic, the country’s economy suffered a negative growth of 2.1 percent in the fiscal year 2019-20. It was the first time since the fiscal year 1982-83 that the economy contracted.
The Central Bureau of Statistics expected growth of 4 percent in the last fiscal year 2020-21 but the central bank said on Friday in the monetary policy that is hard to achieve.
Amid the third wave of the pandemic looming, the central bank has sought to support the enterprises and individuals affected by the pandemic economically. But, there are concerns that there has been uneven support for enterprises affected by the pandemic.
According to the Economic Activities Study Report 2020-21 ( First Half), as much as 37.7 percent of agriculture credits went to the borrowers of Bagmati province and 64.8 percent of industrial credit went to the firms of Bagmati province.
Central Bank Governor Maha Prasad Adhikari said that only three percent of the borrowers have taken 50 percent of total loans. According to the central bank, there are a total of 1.7 million borrowers.
As many as 97 percent of the borrowers are receiving less than Rs10 million loans from the banks and financial institutions, according to Adhikari. He, however, said that it was not the cause of concern as it is the reality of the world at large as just 20 borrowers are receiving 16.5 percent of the total loans in India.
“We should not envy the large firms that receive large chunks of loans as they also create a large number of jobs,” he said. “Our main concern should be whether there has been financial access to small entrepreneurs too.”