Somber economic recession in the offing?

By Pushpa Raj Pradhan

Although, some local economic experts have observed that the Nepali economy seriously hurt by the corona virus pandemic will re-bounce soon, there is no sign of any rapid growth of our economy as predicted. Noted international economic experts have remarked that the global economic growth rate would lower for the first time after the World War 2. They have predicted about a possible somber recession than the global economic recession of 1930.

The US, the largest economy in the globe, is facing crisis. The Gulf countries, whose economy is based on petro-products, are already suffering from decline on demand of the petro-products. For the first time in the history, the petro-product’s price has been recorded at a minus price.

China is overcoming from the coronavirus pandemic and gradually resuming her industries but all previous orders have been cancelled and many industries are lacking raw materials which had to be imported from the countries presently suffering from coronavirus outbreak and lockdown is continued there. Currently, except from those industries producing medicines and medical equipment, remaining Chinese industries are facing many difficulties.

Nepali economy on the verge of collapse:

Nepal’s main sources of foreign currency earning was remittance revenue received from Nepalis working in foreign countries and tourism. Besides, foreign grant and foreign loans are also the source of foreign currency Nepal can spend while importing goods.

It is expected that above 7 million Nepali youths are abroad and they have become jobless due to the closure of industries and construction projects. Many of the companies providing jobs for Nepali workers are already closed due to the financial crunch. The Gulf countries are the main job providers for the Nepali workers. If the global consumption of the petro-products will continue to decline, these countries’ economy will go down and they should cut down employment and it will directly affect Nepali workers. The government has expected the return of around one million Nepali workers from abroad immediately.

Nepali tourism industries are not going to get business soon as the coronavirus is not going to be eradicated soon and there is the psychological factor among the travelers that they don’t wish to travel abroad soon.

The International Labour Organisation has forecast that 1.6 billion people are in immediate danger of having their livelihood affected by the economic impact of COVID-19.

Out of 3.3 billion working population, about 2 billion work in the informal economy and suffer a 60 percent collapse in their wages in the first phase of the crisis, states ILO.

As the novel corona virus pandemic shuts down businesses globally and sends countries into lockdown, the disruptions are threatening to cut off supply chains and increase food insecurity.

Given the above scenario, how will Nepal’s economy be, we can just assume. Nepal is an import based country, even we are importing billions of rupees worth of food grains and vegetables from foreign markets by keeping our agro-land without cultivation.

When the major sources of foreign currency earning will be cut down, Nepal’s economy will have to depend on foreign loans and foreign grants and may be foreign direct investment to meet the import trend of the country. In such a crisis period, when all the countries providing grants and loans to Nepal are badly affected from the pandemic, they will obviously not come to rescue Nepal’s economy! In the post coronavirus impact, no foreigners will be ready to come to Nepal for investment.

Normally, Nepal’s budget structure is that the government is spending above 50 percent of its budget in general expenditure and less than 50 percent budget in the development expenditure. It means, the government is spending above 50 percent of the budget just to meet its expenditure on governance i.e. paying salaries to civil servicemen and people’s representatives, managing expenditure for newly introduced provinces and 753 local bodies, among others.

The total revenue received by the government is not enough to feed the federal structure alone. What about the rest of government business then?

Nepal is at the stage of “no money to spend”. Furthermore, if food scarcity occurs in the international market, how the government will manage food for its citizens? When, as per the government estimate, one million Nepalis will return home, what option has the government is going to provide them? It seems, the government is going to face multiple problems along with the coronavirus pandemic. More serious is that the economy may collapse if the government doesn’t think about its recovery without any delay!