Analysts and economists have criticized the government for its failure to remain within the framework of its announced austerity measures such that it has adversely affected the economic growth rate while raising the public debt significantly.
Speaking at the parliamentary Finance Committee on Sunday, a number of economists expressed the view. While criticizing the government’s announced Principles and Priorities of the annual budget for the next fiscal year, they urged the government to focus on reducing the government expenditure through endorsing actual economic analysis to formulate the budget for the FY 2024/25.
Dipendra Bahadur Chhetri, former governor of Nepal Rastra Bank (NRB), said the government needs to endorse only those projects which ensure reducing financial burden to the country to help reduce the public borrowings. “The government should move towards adopting austerity measures effectively,” he said.
Urging the government to develop models of economic policies based on common political consensus, Chhetri expressed his concerns over providing social securities based on the categorization of income earners and improving bureaucratic procedures to receive reimbursement from foreign donors on time. “The government needs to devise economic models to best utilize natural resources and promote revenue collection,” he added.
Biswo Poudel, former vice-chairman of the National Planning Commission, said the ongoing economic problem is the outcome of the rampant expenditure made by the government in unproductive sectors. “Spending billions of rupees in the unproductive sector has led to an increased burden of public debt than to achieve noteworthy economic growth.”
In the past one decade, Nepal’s public debt has escalated more than four-fold to Rs 2.4 trillion. “In this regard, the government now has to expand projects while reducing the portion of public borrowing,” said Poudel.
Professor Shiva Raj Adhikari, head of the Central Department of Economics, TU, said the government has totally disregarded boosting the confidence of the private sectors. “The improvement of the economy is possible only if the government properly analyzes the current economic situation of the country.”
According to the NRB, the country now has foreign currency reserves sufficient to finance imports for 14 months. Both the current account and balance of payments are in surplus. Despite an improvement in the external sector’s indicators, the economy has been facing a number of challenges related to domestic sectors.
Although banks are having adequate liquidity while the interest rate has also gone down notably, the banks are unable to expand their businesses due to massive fall in demand for loans. In addition, banks are being affected due to an increasing proportion of non-performing loans.
NRB Governor Maha Prasad Adhikari said despite facing a number of challenges, the overall financial and banking sectors of the country are safe. “However, a group of people with vested interests are after taking down the country’s banking sector just to escape settling their outstanding dues to banks.”
