Nepal’s economy has hit the iceberg, but you wouldn’t know it from the politicians fighting it out on the deck.
A serial prime minister cannot form a functioning coalition government even after 6 weeks of assuming office, his coalition partners are too faction-ridden to be a countervailing force, and the main opposition has just split.
All this is nothing new, of course. It has been the way things have been ever since the 1990 changes when democracy was supposed to unleash prosperity. Three decades of political infighting, neglect, conflict, a rent-seeking state and governance failure have left the economy in tatters. And now we have the pandemic to contend with.
If the political battles being played out in the parlours of power were inter-generational or about ideology, something good might have come of it. But such personality driven one-upmanship means that the current crop of ageing politicos has neither the time nor competence to deal with the emergency at hand.
The malaise runs deep. Despite gains in literacy, the poor quality of education drives young Nepalis to seek salaried jobs. The yield from agriculture is so low it does not make sense to farm. Government investment and market support for agriculture are ineffective. Every year, 700,000 youth join the labour market but there are jobs in Nepal for only 15% of them. The rest seek their fortunes abroad by selling ancestral property, fallow farms, lower food production, increasing poverty, and completing the vicious cycle.
Nepal’s trade deficit has averaged $10 billion a year for the last three years. It only went down in 2020-21 because lockdowns reduced fuel imports. Newly released Nepal Rastra Bank trade figures show that the country is, to put it bluntly, bankrupt. The only reason we have not gone completely belly-up is because of remittances, which pumped $8 billion into the economy this year.
Nepal’s biggest import item by far is petroleum and in the past fiscal year it hit Rs175 billion — compared to Rs90 billion the country earned from all other exports combined.
You could say that we are buying oil with the sweat of Nepali migrant workers With tourism receipts and fees from mountaineering and trekking nearly zero, the economy’s reliance on remittances is even greater than before.
This is obviously unsustainable: economically, politically and environmentally. Nepal needs to make good on its target to switch to renewable energy for transportation by 2030 — not just to do our bit to save the planet, but to reduce our economic and political dependence on the outside.
Other interesting things stick out of the NRB trade data. Curiously, Nepal’s biggest item of export is soybean oil when the country is not any major grower of soya. The answer can be seen in the graph for imports: the fifth largest item there is raw soyabean oil. So, we import soyabean oil in bulk from Argentina, Brazil and Malaysia and re-export it to India.