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A key task of the Pushpa Kamal Dahal-led government is to revive the country's economy. Due to various internal and external challenges, the country's economy is in a bad shape. In this context Robin Poudel of Annapurna Post spoke with senior economist Dilliraj Khanal about the challenges that country is facing.  The appointment of a new finance minister seems to have improved relations between the central bank and the finance ministry. How do you see this synergy? We need to understand that development and economy is dependent on politics. The budget proposed by the finance ministry is a political document and the decisions made at the government level have a direct impact on the economy and society as a whole. It is essential for there to be a strong relationship between these two bodies that bring two different policies for development, livelihood, industry, business, economy and monetary policy. The relationship between the central bank and the finance ministry is vital for the effective management of the economy. Political decisions must be made with the goal of maintaining stability for the public, businesses, and the overall economic environment. Coordination between these two bodies is essential in order to develop coherent policies that address the needs of all stakeholders. In the past, a lack of coordination between the central bank and the finance ministry led to problems in the financial policy. Monetary policy was often implemented unilaterally, which created negative impacts on the private sector and people's standard of living. The current synergy between the two bodies is crucial for addressing these issues and ensuring that the needs of the public and private sectors are met. It is believed that the revision of the working capital loan guidelines is the outcome of this synergy. Is the government trying to disseminate the message that it is becoming private-sector friendly? An increase in private-sector investment leads to an increase in production and job creation, which ultimately benefits the public. Coordination between the central bank and the finance ministry is crucial in order to strengthen the supply system and improve the standard of living for the general population. The recent revision of working capital loan guidelines in coordination with the Prime Minister is a positive step, although it may have come late. The central bank had previously expressed concern about the fragility of the economy, but with the formation of the new government, the central bank seems to have changed its tone. How correct is the central bank's statement that the economy is returning to normalcy? Imports have decreased due to restrictions, while remittances have improved. The balance of payment (BoP) situation is becoming favorable with the foreign exchange position. The central bank seems to have said that the economy is returning to normalcy based on this situation. But I don't think so. Even now, the economy is facing a crisis. Interest rates are high, and so is the cost of production. Without investment, production does not increase. The economy is facing a crisis, as evidenced by a number of factors. The revenue is not sufficient to cover current expenses and capital expenditure is only at 11%. Inflation is out of control and non-productive expenditure is high, further exacerbating the problem. The private sector is agitated and there is no return on investment, leading to a lack of employment opportunities and a decline in exports. Agriculture and industry are in disarray, and a large amount of money is being spent on education. All of these factors indicate that the economy is in a precarious state. I don’t agree that the economy is returning to normalcy. However, there are glimmers of hope as power generation is increasing and tourist arrivals are picking up. The government is said to be in a situation to borrow money to pay the salary of its staffers. How can this situation be tackled? Lately, I have been criticizing monetary policy as being one-sided. Tight measures may have been necessary in the past to address a lack of liquidity, pressure on foreign exchange reserves, and high inflation. While these measures may have been necessary in specific circumstances, they have had a negative impact on the supply and investment side of the economy rather than the demand side. The central bank should have been more selective in its approach and taken into account the potential contraction of the economy along with the supply. This is a weakness of the fiscal policy rather than a monetary one. The government should have implemented policies to compensate for the negative effects of the tight monetary policy. It should have brought a policy to increase revenue, realizing that import restrictions would have an impact on revenue. It is positive that coordination between the central bank and the finance ministry has begun. Unproductive investments should be controlled in order to improve the economy. In the past, the government has allowed a limited number of households to invest indiscriminately and then implemented tight policies that have negatively impacted the entire economy. It is important for the government to play a coordinating role by creating an immediate action plan to redirect investments from unproductive sectors to productive ones by providing special facilities. Do you think there is a need for a supplementary budget? In order to provide relief to the private sector and improve the distressed economy, it is important to bring a supplementary budget. However, it would be counterproductive if the budget aims to increase liabilities, non-productive expenses, and allocates funds randomly. It is necessary to restructure the current budget and create a supplementary budget based on the election manifesto of the ruling party and the minimum common program of the government. The budget should also identify medium and long-term problems. However, it should be also noted that the current budget brought by the government for the current fiscal year has everything necessary to address the issues. Capital expenditure does not reach above 60% even after fund transfers, which raises questions about the quality of work being performed. There is a lack of accountability and transparency in the government's development projects, which is perpetuated by a rent-seeking tendency. This cycle affects the overall quality of development works. If the government wants to address these issues, a supplementary budget could be effective in bringing about the necessary changes. We are not in a position to mobilize revenue to meet even our expenses? What caused this situation? The import control policy has led to a decrease in revenue and shrinking demand, which has discouraged private sector investment. The private sector is talking about reducing production, as the purchasing power of people has decreased, and there is no demand for their production. This has led to a decrease in economic activity and a parallel economy has been created. Also, there is a high leakage of revenue, VAT has not been mobilized as per the production numbers. I think direct taxation has a great potential. Also, we have failed to bring expansionary activities in the tax net. The increasing possibility of Nepal being blacklisted for money laundering confirms the illegal business growth. Thus, we are headed for a contraction of the economy. All of these developments are encouraged by our fiscal policy. Was the import ban necessary? Selective restriction was fine. The decision to stop the import of non-essential goods was correct after continuous balance of payment deficits. We shouldn't have allowed such a deficit for a long time. Corrective policies should have been adopted to ensure that measures aimed at controlling one sector do not negatively impact others. While attempting to preserve foreign exchange reserves, the decrease in revenue should have been addressed by implementing policies to increase revenue. High interest rates and inflation have been a major concern for both ordinary citizens and businesses. The belief that high interest rates would curb inflation has not been effective in this case.

Though a prominent leader from the Madhes, Amresh Kumar Singh didn't get a ticket from Nepali Congress in the Nov 20 parliamentary polls. He then contested the election as an independent candidate and defeated a Congress candidate! Pratik Ghimire of ApEx talked to Singh regarding the present political situation.

Where do you see the future of the ruling coalition?

I think it will go far. During our meetings, I have felt that both KP Oli and Pushpa Kamal Dahal have realized their past mistakes and are ready to work together to ensure longevity of the ruling alliance.

Have you thought about returning to the Nepali Congress?

No. My people have given me the mandate to serve them as an independent representative. I won’t go against their will. 

Where do you see the future of the Congress party?

Unless the Congress realizes its mistake and starts working for the people, they don't have a future. Commercialization has hit the party hard. The party should put an end to corruption within its fold. They are still trying to get votes by selling the name of BP Koirala, but this won’t work, I tell you. The present generation has not seen BP and they won’t be convinced. The party should work for this generation, especially for the lay individual; it won’t survive otherwise. Have you seen the party leadership visiting districts, rural areas? The party can't go places by ruling from Kathmandu. They should rather go to the masses and win the trust of the youth. The Congress needs a revolution.

Are our neighboring countries happy with the present government?

We should not think that way. For me, no foreign policy is right or wrong; it should just stick to national interest.  I don't think India and China have this traditional approach to foreign policy. These days, they don't directly interfere in the internal politics of Nepal. Rather, they raise issues during bilateral dialogues. The work of the day of the government depends on how the neighboring nations deal with it. 

Our geopolitical situation doesn't allow us to tilt toward any neighbor. Our foreign policy should promote economic interests like trade balance and a suitable climate for foreign investors. Politics has become a major factor hindering development and investment. How will the government act to tackle these issues? Much depends on that. 

Where do you see Madhes politics now?

Madhes has a political vacuum and this is the reality. New parties have emerged, but there will be no progress in Madhes if the new ones follow the path of the old ones. Unless there is a change in political characters and political tendencies, I don’t think much will change.  Political leaders have often used Madhes-based agendas to climb the political ladder but they never worked for the welfare of the people. 

Madhes has many problems like unemployment, low literacy, weak economy and all but no party has ever bothered to address these problems. Madhes has an agriculture-based economy but it does not have new technology and equipment to cash in on this economy. Madhes needs a social reformer more than a political reformer. 

Norwegian Ambassador to Nepal Torun Dramdal said that if everything goes according to plan, Nepal will graduate from the group of least developed countries in 2026 and then become a middle income country. Speaking with the News Agency Nepal, ambassador Dramdal said “Nepal is moving in the right direction considering the considerable progress in the peace process. Nepal has progressive constitution and this year the elections in May and November were held in a peaceful manner, which are milestones for democracy in Nepal.” Therefore, inclusive democracy and good governance will support Nepal to become a middle income country. How do you see Nepal-Norway relation? Can you explain Norway’s contribution in development and Norwegian approaches? Nepal and Norway have cooperated for many years. It started from people to people cooperation at grassroots level. And, this year (2023) we are celebrating 50 years of diplomatic relations. Nepal is a partner country for Norway, which means that Nepal is a superior country for our development cooperation and our annual assistance to Nepal amounts to approximately $30m. What are the Norwegian development priorities in Nepal? Our main focus for cooperation are education, renewable energy and good governance. These are main sectors and these are in line with the priority of the government of Nepal. And, of course, gender equality and climate change are always on top of our agenda. Those are cross cutting issues that we always have to take into account in everything we do. How do you see the results of the Norwegian investment in the education sector in Nepal? I would like to comment on Nepal for the significant progress when it comes to access to education. Almost all children in Nepal go to school now and I think something that I am really proud of. Norway is advocating in the sector of clean energy. What are the objectives of investing in clean energy? Nepal has a huge potential for hydropower. And back home in Norway, hydropower has been a driver for industrialization and economic growth. And, I hope that hydropower for Nepal will also be a driver for economic growth and job creation. And, of course, Nepal is a country which is very vulnerable to climate change. Renewable and clean energy are crucial parts of the solution. Norway was supporting the people from the marginalized communities. However, we don't see such support continuing. Can you tell us why the embassy is not prioritizing the marginalized communities now? I would say that we still support marginalized communities. We do this through Norwegian NGOs. Many Norwegian NGOs support Nepali NGOs. We also do this through the support of the United Nations in Nepal with this common goal of ‘Living No One Behind’. We support inclusive education, which is particularly important for children from marginalized communities. So, I would say that marginalized communities are very much the target group for our cooperation with Nepal. Nepal’s federal governance system has been moving from the first five year’s electoral cycle to the second cycle. How do you see the implementation of federalism in Nepal? How is Norway cooperating to strengthen Nepal’s federalism? Norway is not a federal state, but a lot of power is decentralized to the local governments. And, if federalism is to succeed in Nepal, it's important that local and provincial governments are able to deliver good services to the people. And, I think that if you visit municipalities in Norway, you would find lots of similarities in the tasks and responsibilities of local governments in Nepal and Norway.  Although some of our municipalities are very small, for instance our municipality called Utsira municipality, they have only 188 inhabitants. And I don’t think you have any municipalities with so few inhabitants.  We continue to cooperate when it comes to good governance. And, the aim is to make the governance system effective and efficient. How does the parliamentary system function in Norway? Does Norway implement any program to strengthen Nepal’s parliamentary system? I believe that it is also important for parliament to engage with citizens. They should be open and transparent. Parliaments are very important because they are democratically elected assemblies that represent the people.  And, in Norway, there is lots of transparency and openness in our parliament. We have journalists in parliament. They can go there every day if they want to. They can move freely around. We always have TV cameras when there is a parliamentary debate. And, we also have a gallery for the general public if they would like to sit down and follow the debates in parliament. Because, we value openness and transparency. Norway is cooperating with the parliament in Nepal. We have a project with UNDP called the ‘Parliamentary Support Project’. Norway has been supporting Nepal to promote good governance. However, the Transparency International’s report shows Nepal’s service delivery has not progressed much. How do you see this? What are your suggestions to promote good governance in Nepal? I believe that transparency and good governance are important foundations for development. And, also strong institutions prevent individuals from abusing power for their own gain. That is why Norway is one of the donors to the provincial and local government support program. That is about capacity building and building stronger institutions. Nepal is one of the countries severely affected by climate change. This year, in the COP27, countries decided to establish a loss and damage fund. Countries like Norway need to support such funds. What is your response? Norway’s ambition is to continue to be a leader in climate finance. And, we support the establishment of a fund for loss and damage at COP27. We see this as a very important outcome of COP27, although there are still some modalities which would have to be worked out. From the Norwegian perspective, it should be a common global responsibility to support those countries which have contributed very little to climate change but they face the harsh reality.

For the first time in its history, Cricket Association of Nepal (CAN) organized a franchise cricket league. But the CAN initiative had a scandalous start, thanks to an alleged match-fixing scandal. What’s more, teams complained that they were not paid and that those responsible for paying them had gone out of contact after the match.  In the wake of these controversies, the Ministry of Home Affairs has ordered an inquiry and the Central Investigation Bureau has already initiated a probe.  Against this backdrop, Chumbi Lama, a CAN member, spoke to AP1 TV, sister broadcaster of The Annapurna Express. Excerpts:  Why did the Nepal T20 league go to an Indian company? In 2020, CAN signed a formal agreement with India’s Seven3Sports, which gave the latter strategic, commercial and advisory rights for almost 10 years. I consider it a black day for the Nepali sports fraternity. I knew from the start that this deal will create misunderstanding in the future with regard to rights given to the company and lack of transparency surrounding international events. So, I had suggested CAN to act as per Nepal’s relevant laws. No one heeded those suggestions at that time.   Who was responsible for the agreement and what roles did you and others have to disagree upon it? The work ethics of Seven3Sports and CAN didn’t match. I and other board members warned the committee to strike a deal with the company, to no avail. CAN signed the deal with Seven3Sports in haste before its annual general meeting. Basically, five members of CAN’s executive board, including chair, vice chair and secretary, worked out these processes.  Can you elaborate on the (Jan 3) dispute in the field? The organizers, ie Seven3Sports, went out of contact and they didn’t provide salary to match officials and players. So, the players and the officials delayed the game in protest.  How do you feel about this incident? Youths like us have joined this field to contribute to Nepali sports, especially cricket. We must put an end to incidents like these. This particular incident has made me sad. Cricket brings families together, forges brotherhood all over the world. Incidents like this must not happen again. My best wishes for the progress of CAN. What’s the mental state of players after the incident? Haven’t talked to the players, but I know everyone is frustrated. So, a solution must be worked out as soon as possible. CAN must investigate the incident properly and report the findings to the authorities concerned.  Police and CIB are also probing the case, so let’s hope for the best. Nepali cricket has a very bright future but we must work hard for the same.