Nepal Rastra Bank’s report last month was badly timed — it was a bad idea to sound a warning that Nepal is going belly up just as the country was grinding to a halt for a month of Dasain-Tihar-Chhat festivals.
The indicators were ominous: Nepal’s foreign currency reserves fell to $11.1 billion in September, much below the figure for last year and only enough to pay for 8 months of imports. There has been a 76% increase in the import bill to a record Rs352 billion last fiscal year — despite a pandemic slowdown.
In the first two months of this fiscal year, overseas remittances that had held steady despite the pandemic went down by 6.3% to Rs155 billion.
One of the holy days of Tihar last week was dedicated to Goddess Laxmi, and many prayed for individual wealth and prosperity. We should have been praying for the country’s economic survival.
Just those two figures for falling remittances and rising imports should have been enough to sound the emergency alarm. But fatalism is so steeped in Nepal’s governance culture that we hope things will sort themselves out.
After all, if things go really wrong, Pashupatinath will come to the rescue. But the Lord Protector of Nepal must be shaking his head at the disarray of the state.
We have come to expect lack of accountability in self-dealing politicians and elected officials, but the judiciary used to be relatively untainted and independent.
The violation of the principle of separation of powers by Chief Justice Cholendra SJB Rana and the mutiny in the Supreme Court has dragged the judiciary also into dysfunction.
With the court system paralysed, Rana has been reported to be looking for a ‘graceful exit’, and apparently proposed a leave of absence until his term expires. The top leadership of the main parties have been silent about the fate of Chief Justice Rana, who after all was instrumental in overturning K P Oli’s dissolution of the Lower House which put Deuba in office on 14 July.
They also have all kinds of pending cases in the Supreme Court, and do not want antagonise a Chief Justice in case he survives this crisis. Rana has reportedly used the holidays for intense political lobbying through emissaries. That would likely entail a quid pro quo over not starting an impeachment process in Parliament in return for future favours.
Whether Rana remains chief justice or is forced to step down is mixed up with politics — after all it was the failure of politicians to sort out their power struggles in Parliament that allowed the judiciary to have such a magnified role in who gets to be in government and who doesn’t. There is so much corruption and vested interest in the political nominations to the Supreme Court that just removing Chief Justice Rana will not stem the rot.
Besides, the real emergency Nepal faces today is not about who succeeds Rana or if the coalition remains intact till elections, but the fate of the economy.
Remittances pay for imports, and inflows are down and imports are up. Hard currency reserves to finance Nepal’s imports, mainly of petroleum, food and other items are falling. Exports did go up, but the trade deficit rose to Rs270 billion in the past two months.
Besides, Nepal’s main item of export is processed palm and soya oil that depend on massive imports of raw material. A growing asymmetry between imports and exports means the balance of payments is now Rs83.4 billion — double what it was in July.
Prime Minister Sher Bahadur Deuba pledged at COP26 to reduce Nepal’s carbon footprint, and Energy Minister Pampha Bhusal is pushing for a transition to electric transport. They seem to have finally realised that having a petroleum import bill more than all exports combined is not sustainable.
Destructive post-monsoon rains will reduce rice harvests by 20%, which means increased food import. What will we use our remaining foreign exchange reserves for: to buy food or fuel? It might to be an either/or.
There does not seem to be a sense of urgency about this emergency in the Finance Ministry. It must act immediately to increase taxes on luxury items, encourage local agriculture production and invest heavily in infrastructure to create local jobs.
The economic crisis is a result of political neglect and disarray. Trouble is: we cannot wait for the politics to sort itself out to fix the economy this time.