The government has made it clear that it is not in a position to announce any stimulus package for the private sector that has suffered heavy losses due to the prolonged unrest in the Tarai and the Indian blockade.

“The government needs a resources to offer a stimulus package but government’s revenue has also taken a significantly hit,” said Revenue Secretary Rajan Khanal, addressing an event in Kathmandu on Monday. “The taxes collected from the trade is the largest revenue source of the government. But both imports and exports have gone down.”

But government officials have said that they are looking for alternative ways to aid the private sector.

The Nepal Rastra Bank (NRB) has warned that the economy could see a contraction of one percent for the first time in 33 years as a result of the blockade and unrest. Around three percent of the Nepali population, or more than 800,000 people, might suffer from extreme poverty due to unemployment caused by ongoing crisis, the central bank said in a report.

The government has already lost revenue worth

Rs38 billion in the last four months due to unrest in the Tarai and the blockade, said Khanal. The government

had targeted Rs 130 billion

in revenue collection by mid-November this fiscal

year but managed just Rs 92.57 billion.

“We need to think about ways to end this crisis,” said Khanal, adding that the government has allotted a grace period for entrepreneurs to submit tax details and that it has also been working on waiving off penalties.

The protests in the Tarai entered 100 days on Sunday, while the blockade has entered into third month.

According to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), goods worth more than Rs100 billion have been stranded in the bordering areas. The businessmen have been forced to pay delay charge at the rate of Rs 800,000 per container, up from Rs 300,000, during banda in the Tarai. The industrial raw materials have also been damaged. The private sector has suffered a cumulative business loss of Rs200 billion, according to FNCCI.  

“This is the biggest crisis we have ever seen,” FNCCI President Pashupati Murarka said, calling for a breakthrough at the earliest.

Former Finance Secretary Rameshore Khanal believes that measures such as decreasing interest rate alone will not be enough to bring the economy back on track. “Stimulus package is not going to work. The issue should be resolved by political leadership,” Khanal said.

Knock-on effect of tarai crisis

- Nepal Rastra Bank warns the economy could contract by 1 percent for the first time in 33 years

- Around 3 percent of the Nepali population, or more than 800,000 people, might suffer from extreme poverty due to unemployment caused by ongoing crisis

- Govt has lost revenue worth Rs38 billion in the last four months as both imports and exports dip

- FNCCI puts private sector’s business loss at Rs200 billion