By P.R. Pradhan
We have been continuously predicting that the nation is facing an economic trap due to the wrong economic policies adopted by the governments since 1990.
The disease that our economy is facing is very old and chronic. When the democratic governments started to feel happy from the revenue received through the custom duty on imports of luxury goods and when the government encouraged import trade by discouraging domestic industries, a negative trend was witnessed in the Nepali economy.
Now, when imports started to dominate our exports at an alarming level along with an alarming decline in the foreign currency reserve and facing a negative balance of payments, the government has become alert and decided to curtail imports. However, along with reducing imports, the government is going to lose the revenue received.
In the meantime, the government, viewing the upcoming provincial and federal elections, is compelled to introduce a populist and ambitious budget for the fiscal year 2022-23.
With the government’s distribution oriented budget the general sector expenditure is under strong pressure.
Meanwhile, without watching the global turmoil following the war between Russia and Ukraine and the Covid-19 impact, the government has expected a huge amount of debt and grants from abroad to operate the budget.
Viewing the global as well as the domestic economic scenario, the present budget for the fiscal year 2022-23 seems non-functional. However, the government may manage the general sector expenditure but it may face an acute shortage of funds for infrastructural development.
If the government fails to improve on foreign currency reserve, it may cut down further imports of many items. Meanwhile, the government has encouraged inflation caused by the domestic economic policy, moreover, the global economic activities may contribute to further accelerating domestic inflation, which may adversely affect the economic activities in the country.
Different countries, including India, have already decided to stop the export of some food items. Nepal has become a country importing agricultural products including rice and paddy. What happens if there will be food scarcity in the international market, the budget has not been thought about.
By undermining the ongoing global economic developments, the government has focused on the upcoming elections and introduced a populist and distribution oriented budget, which may further deteriorate the country’s economy.
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