Cartoon courtesy: Internet
By P.R. Pradhan
A group of political leaders serving foreign interests have introduced the present political system, which is popularly defined as “loot-tantra”. This system has become so costly for the Nepalis to feed. Nepal spends almost all domestic revenue just to feed those political leaders in federal, provincial and local governments. The country needs foreign loans to invest in infrastructural development.
The main reason for the present economic crisis is the increase in the general expenditure and scarcity of the fund for capital expenditure. The government is compelled to impose many taxes on the consumers to meet the fund for general expenditure or say paying salary, allowances and other facilities for the political leaders elected to different positions.
Sure, the Covid-19 pandemic and the recent clash between Russia and Ukraine have hit the global economy, nevertheless, Nepal’s domestic reasons, moreover, excessively incline of the political expenditure are the reasons for the deteriorating economy.
Nepal like a country with poor economy cannot bear the burden of the federal government including seven provincial governments and 753 local governments. We must remove the provincial structures and reduce the number of local governments to make economically sustainable the political structure.
The widening of the tax net has affected the private sector investors. The government is collecting additional 65 rupees as the tax per litre of petroleum products. The government is unable to reduce tax on petroleum products as it is facing a scarcity of funds to spend on the general sector. The price hike on petroleum products will have a chain effect in all sectors due to the hike in the transportation fare.
Our economy is passing through a difficult phase. The Nepal Rastra Bank has introduced different measures for curtailing imports of luxury items. The central bank has reduced the ceiling for gold imports by 50 percent. Also, the limit of the domestic remit has been reduced to 25 thousand with the plan of discouraging the non-banking sector transaction, say Hundi. As the remittance revenue has declined, the central bank has suspected capital flight and money laundering.
The banks are continuing to face the liquidity crisis as the measures introduced to attract cash in banks didn’t work even after introducing a new interest rate above 12 percent on fixed deposits. The volume of foreign trade deficit has inclined dramatically.
The government is unable to cut down the tax amount on such products as it needs money for day to day expenditure.
This is the time to cut down all unnecessary government expenditure. This is the time to reduce non-productive government expenditure and increase investment in the development sector. This is the time for the economists and planners to speak on the economic health of the nation. They should clearly and boldly speak that the present political system has become very costly for the nation. As the provincial governments and also the local governments have become the venues for corruption, the present ‘loot-tantra’ should be scrapped without any delay. A strong mechanism is needed to curb corruption taking place in federal and also in local governments.
If the present political system will continue further, obviously, the nation would meet a financial accident, which could be bankruptcy.
Of course, there are other monitory measures to check the present crisis. However, they cannot be a permanent solution to the ongoing economic crisis. First of all, the government should downsize the volume of non-productive expenditure and increase development investment, which will support improving the economic sector.
Already, the Nepali currency has been overvalued. Therefore, there is an urgency to devalue the currency against the Indian currency. If devalued the Nepali currency, the inflation rate would be skyrocketed.
The main thing is that the government should reduce the non-productive sector investment and increase development sector investment.
Feeding the white elephant or the present political system by squeezing the citizens imposing different direct and indirect taxations cannot be defined as socialism. Anytime, if the government will continue to squeeze its people, a revolt is obvious.
Login to add a comment