By Pushpa Raj Pradhan
Last week, the US dollar price had established a new record of above 114 rupees per unit. Nepal’s currency is tied-up with the Indian currency at 100:160 ratio. As Indian currency has become weak, it has affected our money market. Due to the fixed exchange rate with the Indian currency, we are lucky to get one US dollar at 114 rupees or so. If the Indian currency will become fully convertible, we cannot imagine the price of our currency.
Nepal’s economy is heading towards a negative path. The country is facing serious deficit in international trade. For the last several years, Nepal’s international trade ranks at the ratio of 4:96 i.e. we are exporting goods worth 4 rupees whereas we are importing goods worth 96 rupees. Last year, for the first time in the history, Nepal faced deficit in her balance of payment also. Balance of payment shows the real picture of the economic health of the nation. Negative balance of payment is an indication that our economy may crash in the near future. However, the government has not been able to introduce any effective measures to rescue our economy. The government is happy to see the increase in import based revenue rather than encouraging exports. Until several decades, Nepal was exporting agro-products but now Nepal has become an importer of agro-products that too worth billions of rupees.
If the price of petro products will continue to increase in the international market, very soon, Nepal’s foreign currency reserve will be finished. The country’s dependency on petro-products is increasing in a hyper rate but the government has not been able to introduce any policy to substitute petro-products. If the government would give priority on electricity operating vehicles and use of electricity for cooking food, a remarkable size of foreign currency expenditure can be deducted from import of petro-products. For this, the government could launch a campaign to implement hydropower projects and also educate the people. Unfortunately, the government is encouraging imports of luxury vehicles as she receives attractive amount of tax in import of such vehicles. The government doesn’t want to lose such a big margin of revenue by discouraging imports of automobiles.
On the other hand, by introducing seven provinces and 753 local units in a tiny country like Nepal, the government has increased general expenditure by many folds. The government, to manage general expenditure, has cut down the budget in the development sector. This is also a sad picture of the nation’s economic health. The government is spending the entire budget to feed representatives of the local, provincial and federal governments and also for their facilities, including luxury vehicles and other such things.
Political leaders are involved in rampant corruption and mal-governance. Priority projects are also ruined from political level construction. Pappu Construction is one example. The government has not been able to take action against those defaulters. It has become normal practice in increasing project expenditure by delaying the project works under a planned setting among the political leaders, bureaucrats and construction contractors. Without political level protection or say share of the political leaders, those contractors cannot defy the government rule. But such acts are possible in Nepal due to corruption and political protection.
Currently, the economy of Venezuela is facing serious economic crisis. It is because of the wrong policy introduced by the political leaders under the influence of corruption and commission. The price of a kilogram of tomatoes is above 5,000,000 bolivars, above 0.76 USD. If Nepal will continue to follow the present economic trend, it won’t be too far to see people paying Rs 5000 for a cup of tea!
Nepal following footsteps of Venezuela?
By Pushpa Raj Pradhan