Nepal’s economy is in a bad shape. The global COVID-19 pandemic that began to spread from early month of last year continues to hit the country. The coronavirus outbreak triggered the health crisis, which soon morphed into social disruption and economic recession. The virus resurgence coupled with the political instability turned the economic projections made in the successive annual budgets upside down. In 2018, the then NCP-led government under KP Sharma Oli was expected to deliver predictable stability, policy consistency and good governance to the nation. But less than three years into office, it was mired into internal bickering and corruption scams. Amidst the heightened intra-party dispute, Oli took an unbecoming step of dissolving the House of Representatives (HoR) twice only to plunge the nation into the uncharted political waters. But the Supreme Court stepped in to correct the political course, allowing the formation of new government under Nepali Congress president Sher Bahadur Deuba.

The Deuba government has inherited an economy in a shambles. This is evident in a white paper which Finance Minister Janardan Sharma presented at the Federal Parliament on Tuesday. It paints a gloomy economic scenario. It does not only highlight the current economic situation but also suggests revamping economy with due policy intervention and appropriate adjustment programmes. Minister Sharma also announced that he would unveil the new budget replacing the existing one introduced through ordinance. The rationale behind the decision to bring new fiscal outlay is that it was formulated without taking the availability of fund into account. The upcoming budget is expected to incorporate the policy and priorities as elaborated in the Common Minimum Programme (CMP) of the ruling alliance.

Nonetheless, attaining the stated fiscal goals amidst the looming third wave of pandemic won’t be a cakewalk for the new dispensation given negative indicators of the overall economy. It is now reeling from negative growth of 2.1 per cent against the target of 8.5 per cent in the FY 2019/20. The previous government has lowered the growth target from 7 per cent to 4 per cent for the FY 2020/21. Even this revised target is unlikely to be met. According to the white paper, gross domestic saving was 13 per cent four years ago but is estimated to fall to 6.6 per cent last year. It sees the risk of rising inflation owing to the expansion in the economic activities and price hike of fuels and gas. Similarly, the government debt has increased to Rs. 1729 billion from Rs. 698 billion in the last five years. It is now 40.5 per cent of GDP.

It is a matter of concern that employment and economic activities have not expanded with the expansion of loan from the banks and financial institutions because a large chunk of loan goes into the hands of a few individuals of selected locations. Good news is that the remittance inflow has increased to Rs. 871 billion during the first eleven months of the last fiscal year 2020/21. But remittance is not a reliable alternative to earning foreign exchange. It is necessary to discourage the tendency of spending remittances on consumption which now stands at 70 per cent. Trade deficit is widening due to low export and high import. It has become imperative to devise appropriate policy to attract FDI and establish manufacturing industries so as to boost real economy. Now the government must unveil effective relief package for the poor, small entrepreneurs, farmers and marginalised groups hit hard by the pandemic.