Saturday 15th of December | २०७५ मङ्सिर २९ शनिबार

न्यूज अभियान
हरेक खबर विशेष खबर

Financial crisis and Its current and expected impact in Nepal

न्यूजअभियान | प्रकाशित मिति : २०७५ कार्तिक ३० शुक्रबार |
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Dinesh Prasad,  EUROPE : The recent financial crisis has not done much harm yet, But it may generate a number of side effects in many areas, including government revenue and poverty alleviation that will provide, however false, a favorable image about the recent economic performances.

It may not appear to be a responsible comment for the policy makers who are now in the habit of blaming everything on the financial crisis. In the long run, anything may happen because even seasoned economists of international reputation are still debating about the root cause of the problem itself, let alone its effects.

In Nepal's   case, as far as the current year is concerned, it will not generate negative impact to make a dent in the economy for several reasons.

We are familiar with the structure of the economy. The income of the general public depends on two sources, namely, agriculture and remittances. The agricultural production in the current year is expected to be relatively satisfactory due to favorable monsoons.

The income from remittances, assuming at least the continuation of the last year's   trend, is expected to go up by not less than thirty per cent in local currency due largely to the decline in the value of national currency vis-Ã -vis the US dollar.

As a result, the demand of the general public for goods and services which has shown a decline in a number of developed countries, including the United States and Europe, will continue to rise in Nepal due to structural factors.

In most of the countries, the rise in domestic demand for goods and services will lead to the increase in domestic income as it provides appropriate opportunities for the entrepreneurs to increase investment if the financial resources are available at reasonable cost.

In developed countries, at present, neither are the financial resources easily available, nor the domestic demand has shown a desirable upward trend. As a result, it is claimed that, a new threat may be a gathering force within the American economy too in that the prospect that goods will pile up waiting for buyers and prices will fall, suffocating fresh investment and worsening joblessness.

In Nepal, the domestic investment is not going up, though there is no shortage of resources in the banks at an interest rate less than domestic rate of inflation. At the outset, we can blame political instability. It is also, however, claimed by a few writers that the loan activities as well as the profit of commercial banks have continued to increase.

If the investment is not going up as the available information indicates, how are the resources being used? A senior policymaker of the Nepal Rastra Bank has even suspected the loan resources of commercial banks of being used for foreign investment. Detailed research in this area, however, is yet to be done. Otherwise, the activities of the private sector itself may come into suspicion.

The rise in domestic demand without corresponding increase in the production will lead to a rise in the import of goods and services. As a result, Nepal's  deficit in foreign trade, which has already reached 20 per cent of gross domestic product in 2016/17 will increase further, especially with India as it is now a less expensive country than the others.

There is no reason to complain to India for rising trade deficit as it is due to domestic factors and maintaining unrealistic exchange rate. Notwithstanding high inflation, India has emerged as the most attractive import market for Nepalese, thanks to the failure of the authorities to follow appropriate trade and exchange rate policy.

The rising import, as expected, will lead to a rise in government revenue. The government can claim appropriate programes followed by it for such increase, though it is largely due to slow economic growth corresponding to the rise in money income.

At the same time, the rising receipt from remittances may increase the income of rural people in monetary terms which, statistically, may show, as in the past, a decline in the overall poverty rates. Neither are significant changes expected in the balance of payments situation of the country.

We have to analyses our situation very carefully. It is, however, totally lacking in the country. We need a responsible agency to conduct this task. On the contrary, we are just repeating the past experiences of developed countries.

True, the experiences of the Depression of the 1930s were very bitter, but we have learned much since then. In the 1930s, money supply in the United States had declined by 33 percent and 744 banks had failed.

In Canada, national income in the three-year period between 1929 and 1932 had declined by 55 percent. We have a sketchy information of Nepal experiences during that period which indicate rapid decline in the price of agricultural products that led to many landlord  (zamindars) to bankruptcy. We have, now, ample time to develop appropriate policy to solve the problems that may arise in the long run.


न्यूज अभियान डट कमको एन्ड्रोइड एपका लागि यहाँ क्लिक गर्नुहोस् । हरेक खबर विशेष खबरका लागि अफिसियल फेसबुकट्वीटर मार्फत जोडिनुहोस् ।


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