Nepal: Current Situation of Political Economy

Rajeev Kunwar

March 19, 2022


Nepal: Current Situation of Political Economy

Nepal’s political economy is clamored to be traversing difficult times. Economists are showing concern about the decline in economic and financial indicators after insurgency, earthquake and COVID 19 impact on the political economy.

Politicians are bracing for elections and economic issues were sidelined for many years on the chief task to turn the sequel of democracy bolstered by progress, prosperity, and paxonomics (peace economics).

Liberalism comes to the fore when capitalism and its free-market economic doctrine is finding the toughest challenge to consolidate in a fragile polity and particularly an orient state where advanced economic and financial systems are fledgling since 1990.

One can question how free is the market in Nepal and how politically and economically are sovereign the people of Nepal?

It is inquisitive that intricate elements and factors figure out how politics and economics interplay in the Himalayan state of Nepal when both politics state the people rule and economics state consumer is the sovereign.

Democracy – liberal one against radical version has been braving assault from the variants of the Left when it perceived the political-economic system is not inclusive to the sections or class ignored and marginalized in the process of financialization and capitalization process.

Whereas globalization has brought migrant workers to seashores of West Asia and South East Asia, remittance has relieved the burden of household economics in rural areas and hinterlands of limited economic resources and employment means.

Economics Theory and practice would tell problems and solutions but politics get back in such business too like in any domain for example in science and technology as well (Earthquake or COVID 19).

Nepal’s state of affairs is quite challenging when politics govern everyday lives and mundane activities. Then there is no optimism ahead when situations are not favorable to start-ups to re-energize capital – social, human, and financial.

Thus, there are apprehensions of economic indicators not matching the aspirations of time and circumstances of the teeming people.

Is the current status of the political economy bad or getting worse? Is it the poor economics or economics that is poor?

Or economics that mattered to classes that profited from the state? Is it the legacy of economic profits that benefitted the liquidity of classes?

Certainly, the economics nexus has not covered citizens and a circular economy has not connected well with rural-urban systems.

Economists are blamed for the economic tailspin because of fiscal policy not seeing results or implementation gaps in rhetoric and reality.

I have been wondering if economic growth itself reflects economic development or its quantification is genuine or fake.

All these disasters signal that the state of economic affairs is not going to be business as usual. Either criticism of capitalism and the free-market economy is going to increase or its utopian perfection invoking tension and anxiety-ridden perception of money, labor and assets?

How can we find solace from these pinpricks of the desire for money and satisfaction from the market? How can we get quality goods and services at the best price? How can we buy products where access and needs are met utmost?

How does politics or power exercise to deliver such necessities and items to those who need and to those who crave where and what the affluent aspire to have?

Senior citizens count every penny and save for a future of uncertain period. Accounting responsibly to avoid omissions and commissions, the elders used to check corruption and malfeasance any such untoward and unexpected abuse and misuse of limited resources.

In a similar circumstance, channelization of saved resources could be incurred to the sectors where it needs the most. It would multiply economic potentials, and its precursor policy coordination would build a strong economic nation-state Nepal has been yearning for ages.

It is unfounded when the public criticizes no development models or paradigms Nepal pursues. Nepal’s development blueprint is spelled out in national plans, policies and programs.

The only need is a political will not only policy talking but also policy management. Politics is not only about power or position.

Like any leadership, it is about management and administration of development – political, economic, and social.

These are some simple contemplations of discourse percolating in our political ecology. After issuing white paper and monetary policy, the economic and financial system is told not to be robust and sound to sustain and endure the national treasury.

With a globalization spree getting momentum when it underwent hiccups amid natural and manmade disasters, Nepal needs to follow and execute policies that are formulated so far ceaselessly albeit contingent policy adjustment.

There is no other way than to sharpen focus on public policy and deliver urgent contents pronounced therein. Otherwise, the democratic paradox exists simultaneously with political paranoia. Let me discuss some examples of how development issues crop up in our society.

Recently the World Bank abrogated loan agreements of $138 million when locals stymied Nepal-India Hydro Energy Grid System from the East (Hetauda-Dhalkebar-Inaruwa Section) to the West (Hetauda-Chitwan-Bardaghat Section).

So far 85% of allocated money has been utilized while $30 Million unused has been canceled to media reports.

According to project personnel, NRs 12 Billion is needed to complete the project but due to local opposition on the issues of land money retribution, dispute of the right of infrastructure corridor and forest management issues its cost is getting dearer and burdensome.

These are difficult to tackle given prevailing politicking. On the contrary, such obstructions may result in the loss of money to Nepal from India when hydro energy produced gets wasted.

This could support global green policy to a clean energy-starved rising economy of India and other South Asian countries like Bangladesh and North East India.

Another categorical example of a worsening economic scenario is the deposits and loans ratio which is disproportionate.

It shows a deficit in the Balance of Payments, rise in the volume of import, an uninspiring scope of export and an import substitute to the nature of trade, commerce and business, a need for a formal channelization friendly policy of remittance money, an optimum capitalization of development expenditure and restraining of aid dependency syndrome and policy incentives to FDI enticement, etc.

It can reform savings and due payment on the terms of a durable economic solution to remedy liquidity crises. Likewise, it supports the balance of interest rates.

The Central Bank of Nepal publicly disclosed a current statement of NRs 3 billion that is in the residue of the public treasury.

The Central Bank says it can address Forex money to 7 months trading patterns that make the dollar available to run an import-dependent economy of Nepal.

On the one hand, it is quite interesting to find the posture of the Nepal Auditors Association that demanded to halt irresponsible and inappropriate activities related to the Audit Sector/Enterprises. It intends to maintain good governance and anti-corruption stance in conducting its sectoral business in its upcoming 6th National Convention.

It has proposed to approve such inter-allied issues in the 17 points special resolution. On the other hand, the war in Ukraine has spiked inflation and price hike around the world economies.

It is said that 95% of edible and petro oil from Ukraine and Russia would increase the market price of goods and services in Nepal’s dependence on these warring countries.

Conflict Economics is a feature of state in international relations. It is said to be intrinsic but needs nip in the bud in international intermingling and its economic Thermidor.

The cost of warfare suddenly hampers those pursuing economics in peace. Whereas in Fiscal Year 2078/079 V.S., the National Pride Project of Nepal has accomplished to 18% level of work.

Liberal realists would position themselves on balancing optimism and pessimism to become humane citizens, a perspective to subscribe to when populism and criticism have become the norm in the state of public and international affairs.

So activities need care and attention where we are functioning and where we are behind the schedule so that everything gets synced to keep the system running and citizens happy.

These cases of development hurdles and constraints exist in the current situation in a country where there are achievements in human development indices if one remains optimistic of epochal changes in our interesting times.

So a level of prosperity matters when potentials are stunted and opportunities are squandered. Politics makes policies, and bureaucracy administers to see its fruition.

Many used to say a silver lining after every crisis. There is certainly a grain of truth in economic kinetics after a pause in momentum.

Economics Theory and practice would tell problems and solutions but politics get back in such business too like in any domain for example in science and technology as well (Earthquake or COVID 19).

Therefore, a public policy venture is pronounced more when politics, power and position wield enormous influence to shape the flow and control of economic, fiscal, financial and monetary trends at the national and international levels.

Liberal realists would position themselves on balancing optimism and pessimism to become humane citizens, a perspective to subscribe to when populism and criticism have become the norm in the state of public and international affairs.