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Holding Nepal to account

Bhoj Raj Poudel

Bhoj Raj Poudel

Holding Nepal to account

Our development partners like the IMF and the World Bank should rethink about funneling money into our state coffers without due diligence of service delivery

The International Monetary Fund (IMF) projects Nepal’s economy to remain flat, with the expectation of zero growth in 2019/20 and deep recession in ongoing fiscal year 2020/21. This revision has come as the government has been struggling to cover salaries and other day-to-day expenditure. Many people have lost their jobs as economic activities have shrunk due to the massive spread of the novel coronavirus. The government has failed to contain virus spread. As a result, a section of the population is being forced under the poverty line.

Globally, the World Bank has expected around 150 million people to be pushed into extreme poverty—with an income of less than $1.90 a day—by the end of 2021. The pandemic is going to weigh heavy on developing countries like Nepal. Agricultural output is expected to decrease this year as rice production was hampered by the unavailability of chemical fertilizers. A sharp fall in rice production will affect poor farmers the most. Better preparedness could have averted this.

The World Bank Group’s biannual ‘Reversals of Fortune’ report states that poor countries like Cameroon, the Central African Republic, the Republic of Congo, Liberia, and Nepal will require tailored policy approaches. Post-crisis recovery and future poverty reduction in these complex settings will be challenging and time-consuming. Food insecurity, poverty, conflict, flood risks and other phenomena will further erode the prospect of quick recovery. There must be a coordinated approach to identify interactions among these phenomena to design effective responses.   

Further, the report designates Nepal as among the most vulnerable countries. “Nepal is potentially susceptible to all the major challenges: a pandemic, a recession, current or old conflicts (with enduring effects), and climate change (notably through flood risks),” it reads. “In such “hot spot” context, an array of responses commensurate with the scale and scope of these compounding challenges will be needed to advance inclusive growth and sustain poverty reduction.” This warning in turn brings to focus the government goal of making Nepal a mid-income country with its ‘Happy Nepali, Prosperous Nepal’ slogan. Rather than the country embarking on the path of prosperity, there is now a higher risk of poverty, inequality, and social disparities.

The government has decided to rely on foreign aid and debt to sustain state functions as revenue collection has dwindled. In the first quarter of 2020/21, expenditure crossed income from revenue, which is unusual. The government has failed to lower unnecessary expenditure. Moreover, it declared no measures were off limit to collect revenue during these critical times. The Inland Revenue Department (IRD) has announced that it would deregister almost 29,447 firms if they fail to clear their dues on time. These reckless decisions will further hamper the economy.

With the high risk of falling into poverty due to lack of opportunities, most youths would want to flee the country. The government has started directing its focus on running its own businesses rather than pay attention to people’s welfare. State machinery will probably survive at the cost of people’s suffering.

Against this backdrop, our development partners should rethink about funneling money into our state coffers without due diligence of service delivery. Actors like the World Bank, the IMF, and the Asian Development Bank must start holding governments from these vulnerable countries to account. People can’t do so on their own as these governments have captured electoral processes and other means of check and balance. Humanity’s future is in the hands of these multilateral actors. It is time for them to show some leadership.