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Covid-19 weighs heavy on Nepali economy

Covid-19 weighs heavy on Nepali economy

Prolonged complete or partial lockdown between April and August have been tough on the Nepali economy. The economy has been open for hardly a month in the past six months. During this time, say industrialists, 70 to 80 percent of economic activities in the country came to a complete halt.

Kishor Pradhan, vice-president of the Federation of Nepalese Chambers of Commerce and Industry, estimates that unemployment in the country is up by 80 percent and production has declined by as much. “From now, only the places with high number of infections should be under strict lockdown,” Pradhan recommends.

Former Nepal Rastra Bank Executive Director Nara Bahadur Thapa says the country can bear no more losses due to lockdowns and restrictions. “The economy is already in a critical stage,” he says.

Foreign Minister and government spokesperson Pradeep Gyawali has also spoken about the government’s obligation to keep the national economy afloat despite the health crisis.

Many daily wage workers have had to go hungry during the lockdown, says Thapa adding, “The Indian economy is also opening up despite the rapidly rising number of Covid-19 cases. We should do accordingly.” Thapa is optimistic that Covid-19 vaccines will soon be available.

As the economic crisis escalates, the government has decided to open up many areas. Industrialists are confident that economic activities will increase with the resumption of long-distance transport, hotels, restaurants, trekking, and domestic flights. Covid-19 has hit the service sector particularly hard. According to Thapa, only one-fourth of the service sector, which contributes 58 percent to the GDP, were in operation between April and August.

Likewise, agriculture contributes 27 percent to the GDP and, thankfully, the pandemic does not seem to have created many problems in the sector. Thapa is confident that despite the ongoing shortage of fertilizers, the contribution of agriculture to the GDP will not decline this year.

Industrialists are of the view that the national economy won’t regain its previous rhythm unless restrictions on free flow of people and vehicles are completely lifted. In this context, says FNCCI’s Pradhan, it is good to note that economic activities have picked up following the resumption of transport on September 20.

Sometime ago, officials of the Confederation of Nepalese Industries (CNI) had met President Bidhya Devi Bhandari and petitioned her against imposing another crippling lockdown that could potentially ruin the economy.

The government has also failed on its commitments. According to Pradhan, even though the monetary policy has clear refinancing provisions, banks have started tightening their screws on debt-saddled businesses. “Now there is talk of reducing the previous loan rate to five percent instead of refinancing,” Pradhan says. “It is sad that the government is unable to implement its own monetary policy.”