Nepal’s current account position is also finally looking healthy after four years of recurring deficits. This year, the current account savings were at Rs20.46 billion, indicating that the deficit fell sharply this year because of the drop in imports. Similarly, the balance of payments is also looking better than previous years because imports fell by 10.6% in August-November, and exports rose by 10.8%.
The average bank lending rate has fallen to 9.5% this year compared to last year’s 12%, and this could encourage investors. Says economist Keshav Acharya: “This is the perfect opportunity for those interested in starting quality medical care, better schools, and financing infrastructure and manufacturing.”
In fact, there is no lack of money in Nepal, what the country lacks is the capacity to spend. The government wastes billions every year on infrastructure projects that never get built. Even in the first five months of this fiscal year, only Rs35.1 billion has been spent, which is 10% of the development budget.
Economist Poudel says the government has enough resources to accelerate the construction of 500km of fast-track highways. “You need the political will to go ahead with it, and the slow pace of work on infrastructure is proof that such political will is absent,” he adds.
Indeed, there are several hydropower projects with 700MW capacity under construction, but no one seems to be in a hurry to complete them because of delays in putting up transmission lines. Similarly, the Kathmandu-Tarai expressway, Melamchi Water Supply Project, Tama Kosi Hydropower project, Sikta Irrigation and the Mid-Mountain Highway are all languishing.
Prolonged political uncertainty will delay these projects further, and remove the benefits that Nepal can accrue from its healthy macro-economic position.