Looking at some of the current trends, the flow of debt has increased in one year. About Rs 500 billion has been borrowed since July. Out of this, one hundred and twenty-five billion ‘refinancing face’ loans have also increased to three trillion 75 billion.
According to the recent statistics of Nepal Rastra Bank, about 5.3 trillion rupees is being disbursed under SLF.
But, the Nepal Rastra Bank (NRB) has said that it has to keep cash when opening 100 percent LCs in 1300 products of 40 titles. Even so, imports are expected to reach Rs 2 trillion this year.
Remittances of Rs 9.5 trillion have come from India and other countries. It is around one trillion from India while Rs 8 trillion has come from other countries.
We export goods of around one trillion rupees. One and a half trillion is said to be enough, but I don’t see that either. This does not help either. This time the grant is said to be around Rs 60 billion but only Rs 13 billion has come.
Therefore, the government will not be able to provide government expenditure and money to the private sector.
As stocks decline, so does the government’s ability to build structures, purchase petroleum products, and buy weapons. This is a sign of our foreign currency.
We all have heard that Sri Lanka’s Finance Minister had to flee due to the economic crisis there. What would happen if such a situation arose due to a further economic crisis in Nepal?
Another interesting thing to be noted is that the debt has increased whereas the employment and economic growth are almost stagnant.
Our money is being spent in unproductive areas. We have given one trillion rupees as agricultural loans. How much has agriculture boosted our economy? How are agricultural loans being used? Is it being used for one purpose or another? Therefore, it is important to analyze.
The interest rate has increased from 10 to 12 percent. Interest rates are too high. Raising interest rates will put more pressure on other sectors. If the private sector is charged 14 percent interest on new loans, it will have to go from a minimum of IRR 18 to 22 or 23 to reap the benefits at its own expense. And if there is no condition to repay the loan I see the danger of banks being collapsed.
Isn’t this causing a serious crisis? The only solution is to stop it. A situation is coming when imports have to be stopped for some time. But NRB should study the nature of this crisis.
The current interest rate in the US is 7.9 percent, which is the highest in a period of fifty years. In Europe, it is 5.9 percent.
Due to the crisis in Ukraine, the entire attention of Americans and Europeans is being spent on caring for refugees, and to which the rate of tourists coming to Nepal has declined.
And, we have a crisis. Ukraine and Russia export edible oil to about half of the world. As a result, oil prices are rising.
In that sense, it is possible that oil imports could exceed Rs 6 trillion this year. The ability to spend is becoming very limited. Oil-related substances are related to one another. Therefore, the pressure on oil products has increased. It is not possible to import oil unless everything is controlled. Therefore, attention should be paid to this as well.
Surprisingly, however, the governor has been suspended at this crucial time. This is not a judicious move. This is a step taken on the basis of political bias. The finance minister was saying that we should go more liberally. NRB wanted to manage the foreign currency. In the meantime, the NRB was comparatively correct because that’s what the economic indicators were saying. The action against the governor will have an adverse effect.
Money sent from the United States is to be investigated by an organization, but the minister asks to send the money. We have some international obligations.
If the Finance Minister’s remarks are to be considered, investment should not be brought from abroad. This is not an investment.
There is a different process for investing. If I had brought money, I would have got it. But investment does not come that way. Investment should come from its method according to the investment plan.
The Finance Minister doesn’t understand investment and dollars. Therefore, I look at this kind of incident as having a negative effect.
I agree that this is not only a technical matter but also a political one. When I spoke to the US ambassador, he said, “You want to save Nepal, we will help.”
In the interest of the country, it is necessary to prepare the groundwork whether it is short-term or long-term. For the time being, some restrictive measures should be taken.
Therefore, this is not only a technical but also a political issue. India now says ‘hydropower is not general goods, it’s strategy goods’. When it comes to strategy goods, it includes geopolitics and so on.
This may be a slightly different issue. But whatever the way these things are done, it will lead the country in a negative direction. The government should call all the political parties and civil society to discuss the problems and find a tangible solution.
We all have heard that Sri Lanka’s Finance Minister had to flee due to the economic crisis there. What would happen if such a situation arose due to a further economic crisis in Nepal?
Nepal, which has been facing only a political crisis, has not understood the real pain of the economic crisis.
Nepal’s politicians and citizens have never understood how dire the situation is when the economic crisis comes. We have never been through such an economic crisis.
Nepal had never received foreign aid before 2007 BS. It has been seeking foreign aid since 2008 BS only. It is said that they started taking loans in 2019 BS.
Therefore, we do not know what an economic crisis is. Therefore, it seems that the current situation is on the eve of an economic crisis. What is the short-term duration of the crisis? What is the long term? NRB should analyze this.
In the interest of the country, it is necessary to prepare the groundwork whether it is short-term or long-term. For the time being, some restrictive measures should be taken.
(Edited excerpt of the views expressed by CPN-UML Vice-Chairman and former Finance Minister Surendra Pandey in an interaction program on ‘Current Economic Crisis and Solutions’ organized by Khabarhub)
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